Your super will be given to your dependants (or estate if you have no dependants) if you die while a member – these people are known as your beneficiaries (or some call them benefactors).
Income Stream members can choose to make a reversionary beneficiary nomination, or make a binding or non-binding nomination to dependants or their estate. The best approach depends on your circumstances, but we outline some of the factors to consider below.
What are your beneficiary choices?
Part of your Income Stream is the ability to nominate how your money is distributed if you die whilst still a member. While you can still make a binding or non-binding nomination as part of your Income Stream, a reversionary nomination is another option for retirees. A reversionary nomination provides simplicity in that ownership of the income stream just transfers to the reversionary beneficiary.
Reversionary beneficiary nomination
If you have an income stream, you can choose to nominate a dependent as a reversionary beneficiary which allows your dependent to receive your money as an Income Stream or as a lump sum, if you die.
Things to consider about reversionary beneficiaries:
- it is binding on the Trustee providing it is a valid nomination
- it applies to your entire Income Stream
- it does not need updating unless you want to change it
- only one dependant can be nominated
- it automatically ends if your dependant dies before you
- if you or your dependant is over 60 when you die, it preserves the tax-free status of income earnings and lump sum withdrawals
Nomination of your estate
If you leave your super to your estate, those savings become part of your will for distribution by your legal personal representative.
This means that the proceeds are paid to the estate and appropriate tax is paid before the funds can be distributed. The tax payable equates to 15% of the taxable component of the superannuation account. If the funds are intended to go to a spouse then a far better option may be to nominate a reversionary beneficiary or even a binding nomination to the spouse as this will be tax free.
If the funds are to go to adult children then the estate may be the better option as the estate doesn’t pay the Medicare levy and an individual does. This represents a potential 2% tax saving for certain dependants.
Which is better?
The best option varies with your circumstance, but consider the following points when deciding for your super.
Age of beneficiary
As long as one of the parties is aged 60 or above the reversionary pension will be 100% tax free. However, for your children, turning 18 can change the tax implications for them.
Tax implications for beneficiary
One of the big advantages to a reversionary beneficiary nomination is that the funds remain in a 100% tax free environment as long as the deceased or nominated beneficiary is aged 60. This means that the beneficiary continues to receive tax free payments and investment earnings within the account but retains the ability to access funds, including lump sums, at any time.
However, the reversionary income stream will count towards the beneficiary’s transfer balance cap after a 12 month grace period.
Not all beneficiaries can take an Income Stream anyway
Not everyone is eligible to be a reversionary beneficiary. Most commonly the reversionary beneficiary will be a spouse, however, at the time of your death the following people are also eligible:
- a child less than 18 years of age; or
- a child between 18 and 25 years of age who is financially dependent on the member; or
- a child with a disability of the kind described in subsection 8(1) of the Disability Services Act 1986 (Cth)
- an interdependent*
How to nominate or change a reversionary nomination
You can nominate a reversionary beneficiary as part of your application to start an AvSuper Income Stream.
If you wish to add a reversionary nomination later, or to change an existing nomination, all you need to do is complete an income stream reversionary beneficiary form and return it to AvSuper.
To update a binding or non-binding beneficiary nomination, simply complete a Nomination of Beneficiaries form and return it to AvSuper.
* You may have an interdependent relationship with someone you live with and show an ongoing commitment to the support and wellbeing of you both (please refer to our nominating beneficiaries page for a detailed definition).
Email: email@example.com | Local call: 1300 128 751 | Phone: 02 6109 6888 | www.avsuper.com.au
This information is of a general nature only and does not take into account your personal objectives, situation or needs. Before making a decision about AvSuper, you should consider your own requirements and the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD). For a copy call us or visit the AvSuper website, www.avsuper.com.au. AvSuper Pty Ltd (ABN 46 050 431 797, AFSL 239078) is the Trustee of the AvSuper Fund (ABN 84 421 446 069). FS3000.5 02.2021