Navigating Superannuation Through Life’s Major Changes

Since its inception in 1992, compulsory superannuation has become an integral part of Australia’s retirement savings landscape. The concept is straightforward: regularly contribute a portion of your earnings to a complying superannuation fund to secure financial stability in retirement.

However, life doesn’t always follow a predictable path. Understanding how various life events can impact your superannuation is crucial for maintaining your long-term financial strategy. Let’s explore some common scenarios and their implications for your superannuation.

1. In the Event of Death

Superannuation distribution upon death is governed by Australian tax law, not by your Will. The key mechanism for determining beneficiaries is the Nomination of Beneficiary form, which comes in two types:

• Binding Nomination: Specifies beneficiaries that trustees must adhere to.
• Non-Binding Nomination: Indicates your preference, but trustees retain discretion.

Without a nomination, trustees may distribute benefits in a manner that doesn’t align with your wishes.

Recommended Action: Consult your financial adviser or fund trustee to complete a Nomination of Beneficiary form.

2. Dying Intestate (Without a Will)

Even without a Will, fund trustees refer to beneficiary nominations. In the absence of a binding nomination, trustees assess relationships to determine entitlement. If no dependents exist, the death benefit may become part of your estate and be distributed according to intestacy laws.

Recommended Action: Establish a Will and complete a Nomination of Beneficiary form.

3. Divorce Proceedings

In family law, superannuation is considered an asset. Entitlements are determined through negotiation or court order. Your former partner may choose to:

• Open a new super account
• Roll the amount into their existing fund
• Access the amount if they meet release conditions

Recommended Action: Seek professional advice to understand your new financial position and contribution thresholds.

4. Relocating Overseas

Permanent relocation is no longer grounds for early super release. Your savings can be maintained in Australia under normal preservation and release conditions. Alternatively, you may transfer savings to an eligible overseas fund under the Qualifying Recognised Overseas Pension Scheme (QROPS).

Recommended Action: Contact your fund trustee and the Australian Tax Office (ATO) for guidance on managing super when leaving Australia.

5. Early Retirement

The government’s approved early retirement scheme offers limited tax-free payments for individuals over 65 who haven’t reached retirement age. While designed to encourage early retirement in certain employee groups, strict conditions and complex tax structures apply.

Recommended Action: Consult the ATO or visit the government’s Approved Early Retirement page for detailed information.

Conclusion

Your superannuation represents a significant asset. Regardless of life’s twists and turns, making informed decisions about your super management can profoundly impact your financial security in retirement. Seek professional advice to ensure your superannuation strategy aligns with your changing circumstances and long-term financial goals.