Nominating beneficiaries when holding insurance in super

Product Technical and Regulatory Change

Published: 13 September 2023

In this third article in our Talking Technical series on estate planning, we deep dive into who can be nominated as a superannuation beneficiary in the event of the death of a member.

Where insurance is held in super, the governing superannuation legislation and the relevant fund’s trust deed prescribe the rules and requirements for the distribution of death benefits, including any insurance owned by the fund trustee in respect of the member. These rules are more complex and more restrictive than those in relation to life insurance when held as an ‘ordinary’, or non-super policy.

Last edition, we looked at legal personal representatives and their duties. Future articles will explore the types of nominations of beneficiary available to members of super funds, and the taxation treatment of superannuation death benefits, including insurance held in super.

  • Superannuation is not an estate asset

    From an estate planning perspective, a member’s superannuation benefits (including any account balance, defined benefit and/or insurance in super proceeds) are not, technically, an estate asset. This means that members cannot include directions in their will in relation to the distribution of their super benefits. That’s because the assets and insurance supporting their member benefits are owned by the trustee of their superannuation fund and not the member.

    The trustee, therefore, is responsible for determining who should receive a member’s death benefits, taking into account the sole purpose test of a fund (to provide benefits to a member or their dependants) and any directions provided by the member. The degree to which that direction can be relied on by the member and their beneficiaries, will depend on the type of direction/nomination of beneficiary provided by the member and whether that nomination is valid. More detailed information about the types of nominations offered by super funds will be the subject of a future article in our Talking Technical - Estate Planning series.

  • Who can be a nominated beneficiary for super?

    A super fund member can nominate one or more beneficiaries to receive their super in the event of their death. One of the requirements for the trustee of the fund to accept a nomination of beneficiary is that the member must nominate either:

    • a beneficiary who meets the definition of dependant in the Superannuation Industry Supervision Act (SIS Act), or
    • their legal personal representative (LPR).

    There is a different definition of dependant for taxation purposes when superannuation death benefits are paid. If a superannuation death benefit is paid to someone who is not a dependant under the tax legislation (typically an adult child) and the benefit includes a taxable component, the proceeds will be subject to tax. Taxation of super death benefits will also be covered in a future Talking Technical article.

    It is crucial to have a good understanding of the superannuation definition of a dependant, the tax definition of dependant and the interaction between the two, as only superannuation dependants can receive a death benefit (except where there is no dependant or LPR), but only tax dependants receive concessional tax treatment on superannuation death benefits received.

    Where the member wants certainty that their super death benefits will be paid to their estate and therefore the distribution of those funds to be governed by the instructions in their will, they must name their LPR, that is, the executor/administrator of their estate, as the nominated beneficiary, and that nomination must be valid and binding at the time of death.

    Dependant for superannuation purposes

    A dependant for the purpose of nominating a beneficiary or receiving a benefit from a super fund is limited to:

    • the spouse of the member (including de facto and same sex partners)
    • a child of the member
    • any person who is financially dependent on the member
    • a person who has an interdependency relationship with the member, just prior to the member’s death, and
    • the member’s LPR (on behalf of the deceased estate).

    A ‘child’ of the member is defined to include an adopted child, a stepchild or an ex-nuptial child of any age. It includes a child of the member’s spouse and someone who is a child of the member within the meaning of the Family Law Act 1975.

    To be ‘financially dependent’ on the member, a person must generally have relied on financial support from the member in order to maintain their usual standard of living just prior to the member’s death. For example, financial dependency would not usually be satisfied purely because a member paid for the private school tuition of a grandchild.


    Two people (whether or not related by family) are considered to have an’ interdependency relationship’ if:

    • they have a close personal relationship
    • they live together
    • one or each of them provides the other with financial support, and
    • one or each of them provides the other with domestic support and personal care.

    However, where there is a close personal relationship and they do not satisfy one or more of the remaining requirements because either one or both of them suffer from a physical, intellectual or psychiatric disability, they are still deemed to have an ‘interdependency relationship’.

    In determining whether there is an interdependency relationship, consideration is given to the:

    • duration and sexual nature of the relationship
    • use, acquisition and ownership of property
    • degree of mutual commitment to a shared life
    • care and support of any children
    • public nature of the relationship
    • degree of emotional support, and
    • permanency of the relationship.
  • Invalid nomination of beneficiary

    Where a member does not make a valid nomination of beneficiary, the trustee of the fund will (depending on the relevant provisions in the fund trust deed) either:

    • exercise discretion as to which beneficiary/ies will receive the member’s superannuation death benefits, and in what proportions (whether they are listed on an invalid nomination, or are a tax dependant, or not), or
    • pay the death benefit to the member’s LPR.

    Ajay wants to nominate the following people as his beneficiaries and split his superannuation benefits, including life insurance in super proceeds, in equal proportions to:

    • his wife, Tina
    • his eight-year-old daughter, Annika
    • his disabled sister, Reshmi, who lives with him and is financially dependent on him
    • his mother and father, who do not live with him and are not financially dependent on him.

    However, not all these beneficiaries fall within the definition of dependant under the SIS Act. Ajay cannot nominate his mother and father as his super beneficiaries in this case. If he does, his nomination of beneficiary form will generally be altogether invalid.


When owning life insurance through a super fund, a member must nominate a person who is a dependant under the SIS Act to be the intended recipient of their superannuation death benefits, including the insurance proceeds, otherwise their direction will fail and the trustee will decide who should receive the member’s benefits.