Superannuation Death Benefits: Making a Claim

 Superannuation is a system where money is placed in a fund to provide for a person’s retirement[1].

What is a Death Payment and Who can make a Claim?

A death payment can consist of the deceased member’s superannuation balance (less any charges and taxes) plus any death cover that they may have had.

The Superannuation Industry Supervision Act 1993 (Cth) (SIS Act) provides that the claimant needs to be a dependant (that is, the deceased member’s spouse, child or any person with whom the deceased member had an interdependency relationship) at the time of the deceased’s death, or the legal personal representative of the deceased’s estate, to be considered for a death payment.   However, in each individual case, it is necessary to consider the terms of the trust deed governing the particular superannuation fund in which the deceased member had an interest to see whether it differs from the wording of the SIS Act.

The trust deed is the document which governs the exercise of the superannuation trustees’ discretion.  It outlines what decisions the trustee can and cannot make and who the superannuation trustees must consider in determining to whom to make payment.

Where no dependants exist, then it is common for superannuation fund trust deeds across the superannuation industry, and therefore the outcome of a claim, to vary markedly in their terms.

Superannuation Trustees’ Discretion – Process

The first step is for the superannuation policy provider to be notified of the member’s death.  The superannuation policy provider will check to see whether any beneficiary nominations are in place and, if so, payment may be made in accordance with any valid beneficiary nomination still binding on the trustees at the date of the member’s death.

After receiving notification of a death, the superannuation provider usually provides claim paperwork to the dependant.  In our experience, claimants inadvertently forget to request what is arguably the most important document – the trust deed to which the member’s policy relates, so it is essential to request this document at the outset for the reasons outlined earlier.

A claimant is encouraged to complete the necessary paperwork, to detail all relevant information pertaining to other family members of the deceased and, if they are able, a claimant should provide all documentary evidence in support of their claim and relationship with the deceased.  This information will be used by the superannuation trustees to exercise their discretion as to whom, and in what proportions, the deceased’s death benefits are to be paid.

Once a decision has been made by the superannuation trustees, the claimant and all other relevant parties (ie potential claimants) will be notified of the decision (First Decision). If a potential claimant considers the distribution proposed by the trustees (that is, the First Decision) is unfair or unreasonable then they may lodge what is known as an objection.  As part of their objection, the objector should provide any additional evidence in support of their claim.  The trustees will then reassess the claim in light of any additional evidence and may either stick with their initial decision or change it (Second Decision).   The claimants are then notified of the outcome of the Second Decision.

If any of the parties again consider the Second Decision to be unfair or unreasonable, then they can lodge an objection with an independent governing body, known as the Australian Financial Complaints Authority, which will then work through various processes until the matter is ultimately settled (by conciliation or agreement) or resolved by a determination.

This article highlights the importance of obtaining proper estate planning advice which includes making a valid binding beneficiary nomination in respect of superannuation death benefits.  A nomination will help to ensure your death benefits are paid to the dependant whom you wish to benefit and avoid the exercise of discretion by the superannuation trustees.

We can also assist you if you wish to make a claim for payment of superannuation of a deceased family member.

If you would like advice, please contact Rob Durey or Jacinta Binstead on (08) 6166 9000.

[1] Australian Taxation Office definition of superannuation.