General information, not financial advice. Each bond has its own product disclosure statement, fees and rules. ASIC’s Moneysmart explains bonds in plain words, Services Australia explains the assets test, and a licensed financial adviser can tell you whether a bond suits your own situation.
This page looks at a bond from two sides: the family’s, when someone dies with one in place, and the holder’s, while they are alive and receiving a payment such as the Age Pension.
What makes it a funeral bond
Services Australia, which sometimes calls them funeral investments, lists five features every funeral bond has:
- The money must be in an independently managed funeral fund.
- Interest is added to the capital.
- The fund can release the money only after the holder dies.
- It can release it only to the estate or the funeral director.
- It can release it only to pay for funeral costs.
Moneysmart fills in the rest. A bond usually starts with a deposit and grows through regular payments and interest, but the money is locked to the funeral and can’t come out early. Funeral directors, friendly societies and life insurers sell them, often without advertising, and many leave the choice of funeral director to the holder or their family. Legal Aid NSW notes that there is a maximum contribution limit on funeral bonds.
When someone dies with a bond
Check whether there is one
Legal Aid NSW says it is important for an executor or next of kin to check whether the person had a funeral plan, a term it uses for a prepaid funeral, a funeral bond or funeral insurance. If you’re not sure whether a partner left one, Moneysmart suggests the executor, a solicitor, a financial adviser or the funeral provider may know.
Ask the provider what it can pay
A bond may help with the funeral bill, and Moneysmart suggests asking the provider how much it can pay and what paperwork it wants. The payout is the value of the investment at the time.
A bond is not the same as a prepaid funeral
A bond is an investment. A prepaid funeral is a contract with a funeral director for a funeral chosen in advance, and Legal Aid NSW explains that in NSW the money for one is held in a funeral fund registered with NSW Fair Trading and paid to the funeral director after the funeral. A bond can also be assigned to a funeral director as part of a prepaid funeral, which changes how it is counted in the assets test below.
How Services Australia counts a bond
Funeral costs paid in advance normally don’t count in the assets test for Services Australia payments, but there are some exceptions, and bonds are where they sit. The answers below are from its Age Pension page.
- When is a bond exempt?
When it has been assigned to a funeral director, is for fully prepaid funeral services, or comes with a contract that sets out the services and says they are paid in full.
- And if it isn’t assigned?
The value of up to 2 bonds isn’t included, as long as you don’t also have prepaid funeral expenses and the amount invested in the bonds is under the Funeral Bond Allowable Limit. As at 1 July 2026 that limit is $16,250, and the Department of Social Services reviews it on 1 July each year.
- What about a bond owned jointly?
It counts as a single bond, with the same limit as any other bond, not double.
- What if it isn’t exempt?
It is counted as a financial investment: the part of its current value and interest that is yours counts as an asset, and deemed income from it counts as income.
- Do I need to tell Services Australia?
Yes, about any funeral bond you own, even one you know is exempt. Later you only need to tell them if you pay more into the bond, invest in another, the other joint owner dies, or your financial investments increase in value by $2,000 or more; interest alone doesn’t need reporting.
Worked example (made-up figures)
A couple own one funeral bond together, with $14,000 invested, and have no prepaid funeral. Because a jointly owned bond counts as a single bond, it is measured against one limit, not two.
- Funeral Bond Allowable Limit, as at 1 July 2026
- $16,250
- Amount invested in the joint bond
- − $14,000
- Room under the limit
- $2,250
On these figures the amount invested is under the limit.
Before buying any bond, Moneysmart advises reading its product disclosure statement and checking what it costs.