Super and estate planning
Form in which death benefits may be cashed
Benefits may be cashed in any one or more of the following forms:
- a single lump sum
- an interim lump sum (not exceeding the amount of the benefits ascertained at the date of death) and a final lump sum (not exceeding the balance of the benefits as ascertained in relation to the member's death)
- one or more pensions (subject to restrictions)
- rollover for the purchase of one or more annuities (subject to restrictions).
Restrictions on death benefit pensions and annuities
A member's benefits may only be paid in the form of pension or annuity to a dependent beneficiary of the member (subject to certain restrictions for children).
An eligible recipient's transfer balance cap may also restrict the amount of super death benefit that can practically be taken as an income stream.
Child beneficiaries and death benefit income streams
To be eligible to receive a death benefit as an income stream, a child, at the time of death, must:
- be under 18, or
- be financially dependent on the member and less than 25 years of age, or
- have a disability that:
- is attributable to an intellectual, psychiatric, sensory or physical impairment or a combination of such impairments
- is permanent or likely to be permanent, and
- results in a substantially reduced capacity of the person for communication, learning or mobility; and the need for ongoing support services.
Otherwise, the death benefit must be paid to the child as a lump sum.
Compulsory cashing of child pensions
If death benefits are paid to a child as a death benefit income stream, the income stream must be cashed as a lump sum on the earlier of:
- the day on which the annuity or pension is commuted, or the term of the annuity or pension expires, and
- the day on which the child attains age 25 unless the child has a disability as described above.
Any lump sum received by the child in this situation is tax-free (non-assessable non-exempt income).
Children receiving pre 1 July 2007 death benefit income streams
Prior to 1 July 2007, the restriction on children being able to receive death benefit income streams did not exist, and existing death benefit income streams in place at that time are unaffected by this change.
Therefore, any child (including independent adult children) who commenced to receive a death benefit income stream prior to 1 July 2007 can continue the income stream and is not subject to the requirement for compulsory commutation at age 25
Last modified: Wednesday, May 1, 2019