The premise behind Australia’s superannuation scheme is simple: regularly contribute to a complying superannuation fund to provide financial support upon retirement.

Well, that’s the plan. But what happens if your savings strategy is disrupted before you get to retirement? Knowing how super is affected when life doesn’t go to plan can help you determine your approach.

So, what happens to your superannuation if…

1. You pass away?

Superannuation is governed by Superannuation law, meaning your Will does not determine how the benefits are distributed unless you have made a nomination to pay your superannuation to your estate. This is usually done by the nomination of a beneficiary. If you die without completing any form of nomination, the trustee will decide how to distribute the superannuation proceeds. The proceeds at that time may also include your Life insurance proceeds.

There are two types of nominations:

• Binding Nomination: specifies one or more dependents to receive the death benefits. Trustees must follow your nomination.
• Non-Binding Nomination: records your preference although trustees retain discretion and distribute the benefits according to what is deemed most appropriate.

2. You pass away without a Will (intestate)?

Fund trustees refer to nominations of beneficiaries whether a Will exists or not. If there is no binding nomination of beneficiary, the trustee assesses your relationships to determine entitlement. If there are no beneficiary nomination, the death benefit may become part of your estate and be distributed according to intestacy laws.

3. You get divorced?

Superannuation, in Family Law, is considered an asset and entitlements are determined between you and your former partner through negotiation or court order. In the event of divorce or a relationship breakdown, there may be a need to split your superannuation benefits and share the amount with your former partner.

Your former partner may then:

• Add the amount to their superannuation benefits
• Invest the amount as they like
• Access the amount as a super benefit if they meet standard release conditions.

Tax-free and taxable components are calculated and divided proportionately between the two entitlements.

4. You move overseas?

Moving permanently overseas was once a condition of the early release of super. The Australian government removed this option in 2002, the logic being that your savings can be maintained in Australia, where normal preservation and release conditions apply.

5. You retire early?

To be able to access your retirement benefits, you must meet one of the specified conditions of release, eg attain age 65 or reach your preservation age (currently age 60) and retire. If you decide to retire earlier, you may need to access your investments outside of superannuation environment or apply for government payments until you meet these specified conditions of release.

Your superannuation is a valuable asset, and regardless of what life throws your way, making informed decisions about how your super is managed, can greatly impact your financial security.

Seek professional advice and plan for success!

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional.

We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.