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Past 5-year return
6.38%
Admin fee

$78

Company
MTAA Super
Calc fees on 50k

$513

Features
Advisory services
Death insurance
Income protection
Online access
Term deposits
Variety of options
SuperRatings awards
MyChoice Platinum
Go to site
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Past 5-year return
6.13%
Admin fee

$68

Company
Legalsuper
Calc fees on 50k

$628

Features
Advisory services
Death insurance
Income protection
Online access
Term deposits
Variety of options
SuperRatings awards
MySuper Platinum
Go to site
More details
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Learn more about superannuation

Superannuation death cover (also known as life cover) is a type of life insurance cover. It pays a specified amount of money (or benefit) when you die. The money goes to whoever you have nominated as beneficiaries on the policy. If you don’t nominate anyone, a trustee or your estate will decide where the money goes. 

The amount of the benefit paid is the money in your super account at the time of death, plus any life insurance cover through your super fund.

Isn’t my super covered by my will?

Generally, your will only covers the things you own, for example your house, car and other personal items. It can also include savings accounts, shares and investments.

However, your super is different because it is held in trust for you by the trustee of your super fund. Superannuation is also governed by specific laws and regulations, so you need to stay up to date with your instructions to your super fund regarding your wishes.

Who gets my death benefit?

Upon your death, your super fund trustee usually pays your death benefit to one or more of your dependants or to your estate. In this case, 'dependants' includes:

  • Your spouse (including de facto and same-sex de facto partners)
  • Your children
  • People who depend on you financially
  • People you’ve had an interdependency relationship with

An 'interdependency relationship' exists if two people:

  • Have a close personal relationship
  • Live together
  • Provide each other with financial support or domestic support and personal care

Most super funds will let you nominate the people you want your death benefit paid to, by making either a binding or a non-binding nomination.

A binding nomination means that your super fund trustee has no choice about who gets your death benefit funds because you have already made the decision. The money can go to either:

  • One or more of your dependants
  • Your personal legal representative, who must pay out the money according to your will

A non-binding nomination gives some guidance to the super fund trustee on who will get your super benefits, but they are not required to follow the instructions in your will. The trustee has the final say, especially if you nominate someone who doesn't depend on you. You might make a non-binding when you think your circumstances may change (for example having a child, or more children) or separating from your partner.

If you don't nominate anyone, the trustee will decide who your money goes to. This is not ideal, because it can result in delays and arguments among your family about who should get the money.

How is the death benefit paid?

There are two ways for superannuation death benefits to be paid: as a lump sum or as an income stream.

If your beneficiaries are dependants, the death benefit can be paid as either a lump sum or an income stream. However, if the beneficiaries are not dependants, then they must have the benefit paid as a lump sum.

What are the pros and cons of having superannuation death cover?

The pros of having superannuation death cover are:

  • Cover through your super fund can be cheaper than stand-alone life insurance.
  • It may be easier to manage your cash flow since the premiums will be deducted from your superannuation account rather than your bank balance
  • Most superannuation funds will not require a medical examination for standard cover (although one may be required if you want a higher level of cover)
  • Super policies may also include total and permanent disablement (TPD) and/or income protection insurance
  • If you arrange to salary sacrifice the cost of the premiums instead of having them deducted from you superannuation account balance, there may be tax benefits

What are the cons of having superannuation death cover?

The cons of having superannuation death cover are:

  • Super fund insurance may not give the same degree of cover, or enough cover to effectively protect you and your family
  • You need to make a binding nomination to be sure your money goes where you want it to, otherwise a trustee may decide it should go somewhere else
  • The death benefit payouts have to go through your superannuation fund before they go to your beneficiaries, meaning there can be a delay in the benefit being paid. If you have made a non-binding nomination or none at all, the process will be delayed while the trustee determines the correct beneficiary
  • If you have the premiums deducted from your super account, it means you have less money to be invested and maybe less when you retire (although you can make personal additional contributions to offset this)

Ultimately, the best idea is to explore all the options, to decide whether superannuation death benefit is the best fit for you and your circumstances, both now and in the long term.

Frequently asked questions

What superannuation details do I give to my employer?

When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You should also provide your tax file number – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

Can I choose a superannuation fund or does my employer choose one for me?

Most people can choose their own superannuation fund. However, you might not have this option if you are a member of certain defined benefit funds or covered by certain industrial agreements. If you don’t choose a superannuation fund, your employer will choose one for you.

How do I combine several superannuation accounts into one account?

The process used to consolidate several superannuation accounts into one is the same process used to change superannuation funds. This can be done through your MyGov account or by filling out a rollover form and sending it to your chosen fund.

Can my employer use money from my superannuation account?

No, your employer can’t touch the money that is paid into your superannuation account.

What contributions can SMSFs accept?

SMSFs can accept mandated employer contributions from an employer at any time (Funds need an electronic service address to receive the contributions).

However, SMSFs can’t accept contributions from members who don’t have tax file numbers.

Also, they generally can’t accept assets as contributions from members and they generally can’t accept non-mandated contributions for members who are 75 or older.

How does the age pension work?

Most Australians who are of retirement age can qualify for the age pension. However, depending on the size of your assets and post-retirement income, you might be entitled to only a reduced pension. In some instances, you might not be entitled to any pension payments.

Is superannuation taxed?

Superannuation is taxed. It is generally taxed at 15 per cent. However, if you earn less than $37,000, you will be automatically reimbursed up to $500 of the tax you paid. Also, if your income plus concessional superannuation contributions exceed $250,000, you will also be charged Division 293 tax. This is an extra 15 per cent tax on your concessional contributions or the amount above $250,000 – whichever is lesser.

How do you get superannuation?

You’re automatically entitled to superannuation if:

  • You’re over 18 and earn more than $450 before tax in a calendar month
  • You’re under 18, you work more than 30 hours per week and you earn more than $450 before tax in a calendar month

What are my superannuation obligations if I'm an employer?

Employers are required to pay superannuation to all their staff if the staff are:

  • Over 18 and earn more than $450 before tax in a calendar month
  • Under 18, work more than 30 hours per week and earn more than $450 before tax in a calendar month

This applies even if the staff are casual employees, part-time employees, contractors (provided the contract is mainly for their labour) or temporary residents.

How is superannuation regulated?

The Australian Prudential Regulation Authority (APRA) regulates ordinary superannuation accounts. Self-managed superannuation funds (SMSFs) are regulated by the Australian Taxation Office.

How do you pay superannuation?

Superannuation is paid by employers to employees. Employers are required to pay superannuation to all their staff if the staff are:

  • Over 18 and earn more than $450 before tax in a calendar month
  • Under 18, work more than 30 hours per week and earn more than $450 before tax in a calendar month

This applies even if the staff are casual employees, part-time employees, contractors (provided the contract is mainly for their labour) or temporary residents.

Currently, the superannuation rate is currently 9.5 per cent of an employee’s ordinary time earnings. This is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Employers must pay superannuation at least four times per year. The due dates are 28 January, 28 April, 28 July and 28 October.

What is superannuation?

Superannuation is money set aside for your retirement. This money is automatically paid into your superannuation fund by your employer.

How much money do you get on the age pension?

Pension payments can be reduced due to the income test and asset test (see ‘What is the age pension’s income test?’ and ‘What is the age pension’s assets test?’).

Here are the maximum fortnightly payments:

Category

Single

Couple each

Couple combined

Couple apart due to ill health

Maximum basic rate

$808.30

$609.30

$1,218.60

$808.30

Maximum pension supplement

$65.90

$49.70

$99.40

$65.90

Energy supplement

$14.10

$10.60

$21.20

$14.10

TOTAL

$888.30

$669.60

$1,339.20

$888.30

When did superannuation start?

Australia’s modern superannuation system – in which employers make compulsory contributions to their employees – started in 1992. However, before that, there were various restricted superannuation schemes applying to certain employees in certain industries. The very first superannuation scheme was introduced in the 19th century.

How can I increase my superannuation?

You can increase your superannuation through a ‘salary sacrifice’. This is where your employer takes part of your pre-tax salary and pays it directly into your superannuation account. Like regular superannuation contributions, salary sacrifices are taxed at 15 per cent when they are paid into the fund.

What is salary sacrificing?

A salary sacrifice is where your employer takes part of your pre-tax salary and pays it directly into your superannuation account. Salary sacrifices come out of your pre-tax income, whereas personal contributions come out of your after-tax income.

How does superannuation affect the age pension?

Most Australians who are of retirement age can qualify for the age pension. However, depending on the size of your assets and post-retirement income, you might be entitled to only a reduced pension. In some instances, you might not be entitled to any pension payments.

What is lost superannuation?

Lost superannuation refers to savings in an account that you’ve forgotten about. This can happen if you’ve opened several different accounts over the years while moving from job to job.

What is a superannuation fund?

A superannuation fund is an institution that is legally allowed to hold and invest your superannuation. There are more than 200 different superannuation funds in Australia. They come in five different types:

  • Retail funds
  • Industry funds
  • Public sector funds
  • Corporate funds
  • Self-managed super funds

Retail funds are usually run by banks or investment companies.

Industry funds were originally designed for workers from a particular industry, but are now open to anyone.

Public sector funds were originally designed for people working for federal or state government departments. Most are still reserved for government employees.

Corporate funds are arranged by employers for their employees.

Self-managed super funds are private superannuation funds that allow people to directly invest their money.

What compliance obligations does an SMSF have?

SMSFs must maintain comprehensive records and submit to annual audits.