When a loved one dies, it’s common for family members to consider the resources and funds that may be available to help pay for the funeral. One such consideration is superannuation. In certain circumstances, it may be possible to access either the deceased’s or your own superannuation fund to assist in covering funeral costs.
This article explores the idea of using superannuation to pay for a funeral. We look at:
- What is superannuation?
- Early access to your superannuation to pay for a funeral
- Accessing the deceased’s superannuation: death benefit payments
For more options, see our related article on ways to pay for a funeral.
1. What is superannuation?
Superannuation is money set aside over a person’s lifetime to provide for their retirement. Generally, superannuation can only be accessed once a person reaches a certain age and/or retires.
Superannuation arises in the context of funeral payments for 2 reasons:
- In certain cases, a person may be granted early access to their own superannuation fund in order to pay for a family member’s funeral.
- In other cases, a death benefit payment may be available from the deceased’s superannuation fund. The deceased’s family members may be able to put this payment towards the cost of the funeral.
Superannuation is held for a super fund member in a trust by the trustee of the super fund. It is governed by superannuation law. It is important to note that unlike the rest of the deceased’s money and assets, superannuation is not automatically included in the deceased’s estate.
2. Early access to your superannuation to pay for a funeral
Generally, it is not possible to access the money in your superannuation fund until you have reached your preservation age (i.e. around retirement age). This is because the purpose of superannuation is to provide for your retirement.
However, there are limited circumstances in which you may be granted access to your superannuation fund at an earlier date.
Who is eligible to access superannuation on compassionate grounds?
You may be permitted to withdraw some of the money in your superannuation fund on compassionate grounds.
To do so, you must:
- be an Australian or New Zealand citizen or permanent resident;
- need the money on compassionate grounds;
- have no other way to pay, such as using savings or selling assets.
It is not possible to be granted early access to superannuation in an exempt public sector super scheme.
What are compassionate grounds?
Compassionate grounds include paying for expenses associated with a death, funeral or burial of a partner, child or other dependant.
It is only permitted to withdraw an amount that covers reasonable costs such as the funeral service and headstone.
Importantly, super will only be released early in order to meet unpaid costs. It is not possible to access your super to pay for expenses that have already been paid, whether by loan, credit card or other means.
How do I apply for early access?
You will need to apply to the Department of Human Services for early access to your super.
Will this impact me financially?
It is possible that accessing your superannuation early will have an effect on other payments you receive, such as child support and/or Centrelink. You may also be required to pay a fee to your super fund and/or tax on the money you receive. You should seek financial advice before applying to access your super.
3. Accessing the deceased’s superannuation: death benefit payments
When a person passes away before they retire (and therefore before they have accessed their superannuation), a death benefit payment is made from that person’s superannuation fund to eligible beneficiaries, or to the fund member’s estate.
A death benefit payment consists of:
- the account balance of the deceased member’s superannuation; and
- any insurance amount which is payable (and which depends on the member’s level of insurance cover with the superannuation fund, as well as their age when they passed away).
Who can claim a death benefit payment?
A superannuation death benefit payment can be paid to the fund member’s dependants, or to the deceased’s estate or legal representative (in which case the superannuation can be distributed in accordance with the terms of the deceased’s will).
A dependant generally means:
- the member’s spouse (including a de facto, ex spouse or same sex partner);
- the member’s child;
- a person who was financially dependent on the member at the time of their death; or
- a person who had an interdependency relationship with the member at the time of their death.
Nominated beneficiaries
It is possible for a super fund member to nominate a beneficiary; that is, to specify a non-binding preference that a particular person receives an amount payable when the member passes away. While the trustee will consider the entitlement of nominated beneficiaries, their decision must be based on the question of who is entitled to receive a death benefit payment in accordance with governing law. Accordingly, a nominated beneficiary may not receive a death benefit payment.
Binding nomination
it is also possible for a super fund member to make a binding nomination for their superannuation to be paid to one or more dependants or to their legal personal representative. The trustee must pay the individuals nominated, provided they qualify as legal dependants or the member’s legal personal representative.
How is a death benefit claimed?
Where a claimant notifies a superannuation fund of a fund member’s death, the fund will send certain documents and information to the claimant, including an estimate of the deceased’s account balance and whether the deceased held insurance cover with the superannuation fund. The superannuation fund will request additional documents providing proof of the member’s death.
The trustee of the super fund will then consider who should receive the death benefit. This involves identifying potential dependants of the deceased, and whether those dependants meet the criteria of a dependant as listed above.
The trustee will then inform claimants as to the persons who the trustee proposes to pay the benefit to, and the proposed division of the benefit.
Claimants then have 28 days to confirm acceptance of the trustee’s proposal, or to request a review of the proposal. Claimants may be asked for additional information for the purposes of the review.
How is a death benefit paid?
Once all issues are resolved, the death benefit payment will be paid to the relevant recipients.
Death benefit payments may be taxable. Taxation of a death benefit payment will depend on factors such as the recipient of the payment, the superannuation components, and how the benefit is paid. You should consult your tax advisor for more information.
How long does it take to receive a death benefit payment?
Although super funds are required to make death benefit payments as soon as possible after a member’s death, as described above, the process of claiming a payment and then assessing that claim can take some time. It is possible that family members may need to pay for a funeral before being able to access money from a super fund.
Gathered Here offers a solution to this issue with our buy now pay later option. Through our partnership with zipMoney, you can purchase a funeral from selected funeral directors and pay nothing up front, with 3 months to pay off the loan, interest and fee-free. This option can help relieve financial pressure while you wait to receive the death benefit payment.
Important Note: Buy now, pay later finance on Gathered Here is generally only approved for prime, near prime and emerging prime consumers (i.e. consumers who are likely to be able to repay the loan). We do not promote the practice of lending money at high interest rates to those who are unlikely to be able to repay.
For more information on how to purchase a funeral on 3 months’ interest- & fee-free finance, click here.
We hope you have found this guide to paying for a funeral with superannuation helpful. If you have any questions about our buy now, pay later funeral finance, please don’t hesitate to get in touch with us at finance@gatheredhere.com.au or start a live chat by clicking the floating message box in the bottom right corner of your screen.
See the full picture and make fully informed decisions. Move forward in the certainty that your loved one’s memory will be looked after. Funeral Homes are Gathered Here.
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