Tax Alert - Is there a problem paying your super when you die?

Lowe Lippmann Chartered Accountants

Is there a problem paying your super when you die?

The Government has announced its intention to introduce mandatory standards for large superannuation funds to, amongst other things, deliver timely and compassionate handling of death benefits.

Do we have a problem with paying out super when a member dies?

The value of superannuation in Australia is now around $4.1 trillion. When you die, your super does not automatically form part of your estate but instead, is paid to your eligible beneficiaries by the fund trustee according to the fund rules, superannuation law, and any death benefit nomination you made.

Complaints to the Australian Financial Complaints Authority (AFCA) about the handling of death benefits surged sevenfold between 2021 and 2023. The critical issue was delays in payments. While most super death benefits are paid within 3 months, for others it can take well over a year. The super laws do not specify a time period only that super needs to be paid to beneficiaries “as soon as practicable” after the death of the member.

How to make sure your super goes to the right place

Death benefits are a complex area. The superannuation fund trustee has discretion over who gets your super benefits unless you have made a valid death nomination. If you don’t make a decision, or let your nomination lapse, then the fund has the discretion to pay your super to any of your dependants or your estate.

There are four types of death nominations:

Binding death benefit nomination

Directs your super to your nominated eligible beneficiary, the trustee is bound by law to pay your super to that person as soon as practicable after your death. Generally, death benefit nominations lapse after 3 years unless it is a non-lapsing binding death nomination.

Non-lapsing binding death benefit nomination

If permitted by your trust deed, a non-lapsing binding death benefit nomination will remain in place unless you cancel or replace it. When you die, your super is directed to the person you nominate.

Non-binding death nomination

A guide for trustees as to who should receive your super when you die but the trustee retains control over who the benefits are paid to. This might be the person you nominate but the trustees can use their discretion to pay your super to someone else or to your estate.

Reversionary beneficiary

If you are taking an income stream from your superannuation at the time of your death (pension), the payments can revert to your nominated beneficiary at the time of your death and the pension will be automatically paid to that person. Only certain dependants can receive reversionary pensions, generally a spouse or child under 18 years.

Who is eligible to receive your super?

Your super can be paid to a dependant, your legal representative (ie. the executor of your will), or someone who has an interdependency relationship with you. A dependant for superannuation purposes is “the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship”.

An interdependency relationship is where someone depends on you for financial support or care.

What happens if you don’t make a nomination?

If you have not made a death benefit nomination, the trustees will decide who to pay your superannuation to according to state or territory laws. This will be a superannuation dependant or the legal representative of your estate to then be distributed according to your Will.

Where can it go wrong?

There have been a number of court cases over the years that have successfully contested the validity of death nominations. For a death nomination to be valid it must be in writing, signed and dated by you, and witnessed. The wording of your nomination also needs to be clear and legally binding. If you nominate a person, ensure you use their legal name. If your super is to be directed to your estate, ensure the wording uses the correct legal terminology.

One of the reasons for delays in paying death benefit nominations cited by the funds is where there is no nomination (or it is expired or invalid), there are multiple potential claimants, and the trustee needs to work through sometimes complex family scenarios.

The bottom line is, young or old, check your nominations with your superannuation fund and make sure you have the right type of nomination in place, and it is valid and correct. While there still might be a delay in getting your super where it needs to go if you die, the process will be a lot quicker and less onerous for your loved ones.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

< Older Post

Newer Post >

FEDERAL BUDGET 2026-27

May 12, 2026

SUMMARY AND FULL COMMENTARY UPDATES

Practice Update – May 2026

May 4, 2026

Special Topic: Payday Super changes apply from 1 July 2026, act now to be prepared! The ATO has issued further guidance on Payday Super changes that apply from 1 July 2026. In particular, the ATO released a ‘Payday Super checklist for Employers’ ( click here ), which is a good summary of the tasks that should be completed before 1 July 2026, and now is the time to act. Understanding ‘qualifying earnings’ From 1 July 2026, employers will calculate super using ‘qualifying earnings’ ( QE ) instead of the current ‘ordinary time earnings’ ( OTE ). For many employers, the new concept of QE is broader than OTE, but it should not change the amount they need to pay for their employees. However, it may require updates to payroll software configuration and reporting. Employers should review and prepare to correctly map pay codes now to meet reporting obligations and ensure readiness when their updated payroll software is available. QE include the following payments: OTE (ie. payments for ordinary hours of work), including certain types of paid leave, allowances, bonuses and lump sum payments. There are no changes to what payments are considered OTE under Payday Super. For a full list of payments which are included within OTE – click here . All commissions paid to an employee. Salary sacrifice amounts that would qualify as QE had they not been sacrificed to superannuation. Earnings paid to workers who fall under the expanded definition of employee, including payments to independent contractors paid mainly for their labour. Some payments may fall into more than one category of QE, such as commissions, and those payments are covered only once to the extent of the overlap in categories. The total QE for a pay period is determined by aggregating all qualifying payments made to or for an employee on the relevant day, forming the basis for calculating superannuation guarantee ( SG ) contributions. Each payday, employers will need to report both year-to-date QE and superannuation liability for each employee through Single Touch Payroll ( STP ). Employers should confirm their updated payroll software has this reporting functionality built in. Understanding new timing requirements for super contributions From 1 July, employers are responsible for ensuring that super contributions reach super funds within 7 business days of the relevant payday , calculated on the QE amount. Super funds will have 3 business days (down from 20 days) to allocate or return contributions that cannot be allocated. There is currently no obligation for the Super fund to confirm that an employee contribution has been allocated successfully, however if 3 days have elapsed we can accept that the employee contribution has been processed correctly. A super payment only counts once it is received by the employee’s superannuation fund, not when it is submitted. Submitting on day seven may not allow enough time, and we note there is no extension for rejected payments - so employers must ensure there is enough time to correct any errors and for SG contributions to reach funds within the 7 business days. Understanding importance of testing payroll software before 1 July 2026 Prepare now, review your payroll system readiness, engage with payroll software providers and ensure the functionality for these new changes will be supported. It has been widely suggested that new payroll software functionality is tested and everything is running smoothly before 1 July. Note that super payments for pay cycles in July 2026 may be due before your final quarterly super payment is due on 28 July 2026 (ie. for the June 2026 quarter, being April to June). Contributions received on or before 28 July 2026 will reduce any super owing for the June 2026 quarter first . If there is any remainder, contributions will then be used under Payday Super. If you pay on time for the June 2026 quarter and Payday Super you do not risk incurring penalties. The ATO has provided an example of this issue ( click here ), and explains that if the employer pays the correct amount for the June 2026 quarterly payments and the first Payday Super payment (ie. for the first pay cycle in July, which could be weekly or fortnightly) is paid in full both contributions will be made on time. Understanding cash flow pressure Employers may have multiple super payments due during July 2026, including: super payments for each Payday (after 1 July 2026); plus the final quarterly super payment due 28 July, for June 2026 quarter (ie. April to June). Employers should review their expected pay cycles for July 2026 to understand the impacts of paying super each payday after 1 July 2026. Employers may consider setting aside additional funds to make sure they can meet their obligations. If cashflow permits, employers can pay the June 2026 quarter super on or before the first payday in July (ie. the first pay cycle in July, which could be weekly or fortnightly). If an employer can do this, your business will have: a more seamless changeover to the Payday Super system; and time to correct any rejected payments before the 28 July deadline. We recommend that all employers take actions as soon as possible to be best prepared for the Payday Super changes coming in from 1 July 2026. If you require assistance, please contact your Lowe Lippmann representative.

Practice Update – April 2026

April 12, 2026

Know when a new logbook is required Keeping a car logbook may be required to accurately calculate the business-use percentage of vehicle expenses (ie. fuel, registration, insurance and depreciation) for tax deductions. Taxpayers can keep the same logbook for their car for five years, but there are circumstances where they may need a new one during that period. Relying on a logbook that no longer represents a client's work-related travel may result in them claiming more, or less, than they are entitled to. A new logbook may be required when a taxpayer: moves to a new house or workplace — updating their residential or work address may then be necessary; or has changes to their pattern of use of the car for work purposes — checking that they are still doing the same role and routine may then be necessary. Taxpayers using the logbook method for two or more cars need to keep a logbook for each car and make sure they cover the same period. Clients who purchase a new car during the income year and want to continue relying on their previous car's logbook must make a nomination in writing. The nomination must be made before they lodge their tax return and state: they are replacing their original car with a new car; and the date that nomination takes effect. Taxpayers should remember that, if their employer provides them with a car or they salary sacrifice a car using a novated lease, they are not entitled to claim work-related car expenses using the logbook or cents per kilometre method, as they do not own the car. When claiming car expenses using the logbook method, taxpayers also need to keep various types of other records, including (among other things) odometer records for the start and end of the period they own the car, proof of purchase price, decline in value calculations, and fuel and oil receipts (or records of a reasonable estimate of these expenses based on odometer readings).