Louise Biti discusses the problems that can arise with the payment of superannuation death benefits and how to help clients avoid disputes.

The death benefits in su­perannuation can be quite substantial, even if the person’s ac­count balance is not. This is because many funds provide members with substantial levels of life insurance.  Disputes commonly arise over the payment of superannuation death benefits, so it is important to discuss the implications carefully with clients and to consider ways to mitigate the problems. Regardless of age, everyone with money in su­perannuation should consider who they wish to receive the death ben­efits and how to ensure the money gets to the intended beneficiary.

Careful planning can avoid disputes and ill feeling between family members, but it can also help to avoid lengthy payment delays.  To minimise disputes, advisers should discuss with clients:

  • Who can potentially make a claim for the death benefits;
  • Who the client wishes to receive their death benefits;
  • The options for binding death benefit nominations;
  • The importance of having a Will that includes clauses to cover the payment of superannuation death benefits.

How things can go wrong is best analysed by looking at real life case studies, such as disputes resolved through the Superannua­tion Complaints Tribunal (SCT). Approximately one-third of all SCT cases involve disputes over the payment of death benefits.  


In December 2009, the SCT overturned a death benefits decision made by the trustee of a superan­nuation fund. This case shows the importance of estate planning for superannuation death benefits. The deceased member was an 18-year-old man. He had not made a Will, was not married and had no children. The superannuation fund trustee found that he had no SIS dependents and so determined to pay the death benefits equally among his father, mother and brother.  The deceased’s girlfriend lodged a complaint with the SCT, on the basis that she was in an interde­pendency relationship with the deceased.


A superannuation death benefit can only be paid to a SIS depen­dent. This includes:

  • Current spouse (legally registered or living together on de facto basis);
  • Child of any age (including child of a spouse);
  • Person who was financially dependent upon the deceased;
  • Person in an interdependen­cy relationship with the deceased;
  • The deceased’s legal personal representative.

Only if there are no SIS de­pendents can the benefits be paid to another person. In this case the trustee decided that no dependents existed and followed the instruc­tions in the deceased’s non-binding nomination. This nomination was made quite soon after starting the relationship with his girlfriend.


The deceased’s girlfriend lodged a complaint with the SCT claiming she was in an interdependency relationship with the deceased. To prove this relationship she needed to meet all four aspects of the interdependency definition. Her claim was based on the follow­ing criteria:

i. Close personal relationship – this was clearly met as they had been together for two years and had a sexual relationship.

ii. Living together – the girl­friend lived at home with her par­ents but the deceased often stayed over and they slept in the same bed. Three months before he died, he moved in on a more permanent basis. He paid board to her parents of $70 per week.

iii. Financial support – she claimed that although they did not have a joint bank account or own joint property that they paid ex­penses for each other from time to time, and in particular when either one was not working.

iv. Domestic support and per­sonal care – she claimed they shared domestic duties.  


The deceased’s family claimed it was not a true de facto situation and did not meet the require­ments for an interdependency relationship. They claimed that the deceased had only lived with his girlfriend for a three-month period and it was just for convenience rather than a “commitment to a shared future life”. This is an impor­tant aspect for proving the existence of an interdependency relationship.  The family members were not claiming to meet the definition of a SIS dependent; so to be eligible to receive death benefits, they needed to prove that the girlfriend was not a SIS dependent either.  


On the basis of the facts presented, including testimonies from family and friends, the SCT found that the girlfriend (complain­ant) and the deceased were in an interdependency relationship.  The other family members were not SIS dependents and therefore, the existence of a SIS dependent (the girlfriend) meant they were not eligible to receive any of the death benefit. The SCT overturned the trustee decision and awarded full payment of the superannuation death benefit to the girlfriend.  


Some interesting points to note from this case:

• The definition of interde­pendency relationship requires evidence of “a close personal rela­tionship”, not of a de facto relation­ship. It should, however, be noted that the SIS definition of a de facto relationship can be established after just one day of living together. This may be different from the de facto definition in family law provisions.

• Estate planning for young people is often overlooked as it is assumed that they do not have many assets. However, they often have high levels of insurance cover inside an employer superannua­tion fund. In this case, the disputed death benefit was for $131,437, of which only $1537 was accumulated savings.

• Dealing with disputes through the SCT system is lengthy and may cause hardship for dependents who need to rely on the money from the death benefit. In this case, the member died on December 8, 2007. The trustee made its decision on May 21, 2008 and the complainant lodged a complaint on August 19, 2008. The SCT made its final decision on December 1, 2009. This was two years after the member’s death.  


Estate planning issues and the payment of death benefits should be raised with every client. Advisers should also be talking to clients about estate planning for their children.  Get your clients to identify all the people who could have a po­tential claim against their superan­nuation and decide who they want to receive payments and where the problems could lie. From here, you will be in a position to help your client to develop solutions to avoid these problems.

In this particular case, if the deceased member had wanted his death benefits to be paid to his father, mother and/or brother, this may have been achieved by making a binding death benefit nomination payable to his estate (if allowed by the superannuation fund) and then making a Will with instructions on how to distribute the payment. Disputes could still arise if the girlfriend had the right under Fam­ily Law provisions to contest the estate. However, in most states she would need to prove de facto status and this might require that she lived with her boyfriend for a longer period of time.  If the deceased member wanted his death benefits to be paid to his girlfriend, it may have helped the process if he had documented the nature of their relationship in regards to the financial support, domestic support and personal care, to prove the interdependency.

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