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11 Sep SUPERANNUATION DISPUTES

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When a deceased person passes away with superannuation, the superannuation fund will usually pay a death benefit in the form of a lump sum payment or income stream. The superannuation death benefit typically will not form part of the deceased’s estate; however, this will either be determined pursuant to the rules of the fund (trust deed) or a binding death nomination (BDN).

Where the superannuation death benefit is paid and forms part of the estate, then the general principles of family provision will apply. Where the death benefit is not paid to the estate then the eligibility to receive the benefits will come into play.

Am I eligible to superannuation benefit?

The legislation which governs superannuation is the Superannuation Industry (Supervision) Act (Cth) 1993 and the Superannuation Industry (Supervision) Regulations (Cth) 1994 (“the SIS Act”).

Payments of a deceased’s superannuation death benefits will usually be paid to people who are considered “dependants” under the SIS Act or in accordance with the deceased’s BDN. Dependants within the meaning of the Act include:

  • The Executor or Administrator of an Estate (for the purposes of payment to the estate)
  • Spouses
  • Defacto spouses
  • Same sex couples living together on a genuine domestic basis
  • Children including, stepchildren, adopted children, adult children and ex-nuptial children
  • Financial dependants i.e. reliance on financial support provided
  • Interdependents

There are two tests which a person must satisfy in order to be classified as being in an interdependent relationship with the deceased.

1) The basic test
Under the first test, two people are in an interdependent relationship if;

  • They have a close personal relationship
  • They live together
  • One or the other provides financial support to the person
  • One or the other provides domestic support and personal care to the other person

A close personal relationship is where the parties show an ongoing commitment to the emotional support and well-being of one another. There are a number of factors which are taken into account when determining whether an interdependent relationship exists and these are set out in the SIS regulations.

2) The disability test
Under the second test, if the parties to a relationship fail the first test then they can still be considered in an interdependent relationship if:

  • They have a close personal relationship (as defined above)
  • Either one or both parties suffer from a disability which makes it difficult for either one of them to meet the criteria of the first test

It is important to note that a Trustee of a superannuation trust fund will exercise the discretion to pay the death benefit to people who are considered “dependants” as the fund will retain concessional taxation treatment.

Frequently Asked Questions

How do I apply for the superannuation benefit?

On the death of a member, if they have not nominated a beneficiary under a BDN and you fall within the category of “dependant”, then you can make an application to receive the death benefits directly from the superannuation fund. Contact one of our experts today to assist you in making a claim.

 

What are Binding Death Nominations (BDN)?

Some superannuation funds will allow members to nominate a preferred beneficiary to receive their death benefits. A BDN will bind the Trustee of a superannuation fund if it is considered binding and valid. This means that the Trustee will not have the discretion as to where the death benefits are paid. A valid BDN cannot be altered by the Superannuation Complaints Tribunal or a Court.

There are two basic requirements for BDNs. Firstly, the superannuation fund rules must allow BDNs and secondly, the nomination itself can only name beneficiaries who are entitled to receive benefits under the SIS Act, as detailed above.

What are the requirements for a valid BDN?

For a BDN to be valid and binding, it is required to:

  • be in writing
  • be signed and dated by the member of the fund in the presence of two independent adult witnesses
  • set out the proportion of the death benefit to be paid to the nominated beneficiary

A BDN will usually cease to have effect three years after it is signed. It is therefore imperative to review your nominations every three years. Depending on the superannuation fund, the time period may be shorter. The Trust Deed is therefore relevant in this regard.

Where the BDN does not comply with the requirements, the Trustee of a fund does not have the discretion to pay it to the nominated beneficiary. Instead, the death benefit will be paid to “dependants” within the meaning of the SIS Act.

How do I contest the decision of a Trustee to pay the death benefit?

A superannuation trust fund usually allows the Trustee the discretion to decide who should receive a deceased’s death benefit, within the range of eligible recipients. If you are not happy with the decision, contact us today to discuss your options in challenging the Trustee’s decision.

The Trustee will usually review your objections and make a decision after 28 days. If you are still not satisfied with the decision, an appeal can be made to the Superannuation Complaints Tribunal. There are time limitations in which you can make an application, therefore legal advice should be obtained as soon as possible.

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