General information, not financial advice. Each fund has its own rules and forms. Moneysmart’s guide to claiming a death benefit and the ATO’s death benefit pages are the official places to check, and a licensed financial adviser can tell you how the tax applies to you.
There are two quite different ways super can meet a funeral bill. One is the super of the person who died, paid out as a death benefit. The other is your own super, released early by the ATO to pay for the funeral of someone who depended on you. They are set side by side here, then each is taken in turn.
The two ways, side by side
A death benefit from their super
- Whose money
- The person who died: what was in the account, plus any insurance held through the fund and anything else the fund owes.
- Who decides
- The fund’s trustee, looking first for a valid nomination, then at who qualifies under super law and the fund’s rules.
- Who receives it
- Eligible people such as dependants, or the estate through the person’s legal personal representative.
- When
- After a claim, on a timetable that differs from fund to fund and claim to claim.
Early release of your own super
- Whose money
- Yours, to pay death, funeral or burial expenses for your dependant.
- Who decides
- The ATO, which can approve a release only if you meet all five of its conditions.
- What it can cover
- Only what is still unpaid, or was paid with borrowed money not yet repaid.
- When
- A last resort, only after all other ways of paying have been exhausted.
Their super: the death benefit
Who counts as a dependant
For deciding who receives a death benefit, the ATO explains that super law treats you as a dependant if, when the person died, you were their spouse or de facto spouse, their child of any age, or in an interdependency relationship with them (a close personal relationship, living together, one or both giving the other financial support, and one or both giving domestic support and personal care).
Nominations
If the fund allows a binding nomination, the member can direct the benefit to one or more dependants or their legal personal representative. With a non-binding nomination or none at all, the trustee may use its discretion to decide which dependants to pay, or may pay the executor for distribution under the will. Legal Aid NSW notes that where there is a binding nomination, the fund pays according to the nomination, not the will.
Claiming it
Moneysmart’s guidance, in short: work out which fund held the money (old statements, payslips and the employer are good clues), ask that fund how to claim, send what it needs, and keep a record of everything you send and every call. Expect to need the death certificate, your own ID and proof of how you were related; where the estate is the one being paid, the fund may also want the grant of probate or letters of administration, if there is one. Moneysmart lists waiting on probate for an estate payment among the usual causes of delay.
Insurance inside super can matter here too. Moneysmart points out that some super accounts carry insurance that could help with the funeral, and the fund can say whether this one does.
Tax on the benefit
If you are a dependant under tax law, you don’t pay tax on the taxable component of a death benefit received as a lump sum. If you are not a dependant, you can only receive it as a lump sum, and the taxable component is taxed at no more than 15% plus the Medicare levy for the taxed element, and no more than 30% plus the Medicare levy for the untaxed element. The tax-law list of dependants is not the same as the super-law one: it includes a former spouse, but a child counts automatically only if under 18, and children over 18 must have been financially dependent on the person.
If there’s a delay or a dispute
Moneysmart’s order is: ask the fund where the claim is up to, then complain to the fund itself, then take it to external dispute resolution if that doesn’t settle it. Legal Aid NSW gives the time limits: 28 days from being told of the decision to ask the fund for an internal review, then 28 days to go to the Australian Financial Complaints Authority (AFCA).
Your super: release for a dependant’s funeral
The ATO sets three conditions for this expense: the person has recently died, your relationship met the definition of a dependant, and the expenses relate solely to their death, burial or funeral. On top of those sit the five general conditions: residency, an eligible expense, the expense not yet paid (or paid with borrowed money not fully repaid), not being able to pay without your super, and having all the evidence.
What it can and can’t pay for
Expenses that may be eligible include the death certificate fee; professional fees for the funeral or burial, such as venue hire, celebrant or clergy fees, flowers or public notices; burial fees including the coffin, casket, cemetery fees and plot; cremation costs including the urn; interment of ashes; and transport of the person to and from the service. Generally not eligible: a wake, a headstone, a monument, non-essential items such as dove releases or entertainment, and prepaying your own funeral.
Worked example (made-up figures)
A funeral invoice for a partner totals $9,600. A deposit of $2,400 was paid from savings when the funeral was booked, and the rest is due next month. The ATO can approve a release only for the outstanding balance of an expense, so the deposit already paid from savings can’t be recouped.
- Invoice total
- $9,600
- Deposit paid from savings
- − $2,400
- Most the ATO could approve
- $7,200
If the deposit had been paid with borrowed money not yet repaid, the borrowed amount could be part of an application, with extra documents.
The evidence for this expense includes proof of death (a death certificate, including a provisional one, a coroner’s certificate, or a signed letter from the doctor or funeral provider), a quote or invoice, and, unless the person was your spouse or your child under 18, evidence of the interdependency or financial dependency. The general conditions also ask for evidence of the other ways you considered to pay.