If your life insurance is held inside super, the payout is treated as a super death benefit — and who receives it is decided by your death benefit nomination and super law, not your will. Getting this wrong can send the money to the wrong person, or trigger avoidable tax.
The types of nomination
- Binding nomination: legally binds the trustee to pay as you direct (if valid). Many lapse after 3 years unless renewed; some funds offer non-lapsing versions.
- Non-binding nomination: a preference only — the trustee still decides.
- No nomination: the trustee decides, which can mean delay and disputes.
Who can receive it
Super (and the insurance in it) can only be paid to your dependants for super purposes — spouse, children, someone financially dependent or in an interdependency relationship — or to your estate. Anyone else must be paid via your estate.
Frequently asked questions
Does my will control my life insurance in super?
No - if the cover is inside super, the payout follows your death benefit nomination and super law, not your will, unless you nominate your estate.
What’s a binding death benefit nomination?
A nomination that legally binds the fund’s trustee to pay your benefit as you direct, provided it’s valid. Many lapse after three years unless renewed; some funds offer non-lapsing versions.
Will my kids pay tax on the payout?
A benefit paid to a tax dependant such as a spouse is generally tax-free. Paid to a non-dependant like a financially independent adult child, the taxable component is generally taxed at 15% plus Medicare.
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