Previously known as Birman & Ride
>
>
>
What is a superannuation proceeds trust?

Blog

What is a superannuation proceeds trust?

A superannuation proceeds trust is a type of testamentary trust that can assist to save tax if your superannuation death benefits (including any life insurance proceeds in your superannuation fund) are paid into your estate for distribution pursuant to the terms of your Will.

Superannuation proceeds trusts are particularly helpful where:

  1. your Will includes one or more testamentary trusts;
  2. your superannuation benefits will be paid from your superannuation fund to the executor of your estate; or
  3. you have a spouse, minor children or other financial dependants who could receive your superannuation tax free and you want them to benefit from your superannuation benefits.

Why is a superannuation proceeds trust necessary?

The short answer is to save unnecessary tax!  A superannuation proceeds trust is a completely legitimate tax savings mechanism under the Australian tax laws.

Not everyone can receive your superannuation death benefits tax free. If your superannuation benefits are paid to your executor to be distributed under your Will, then only the following people will be able to receive your superannuation death benefits tax free:

  • Spouse
  • Former spouse
  • Child under 18
  • Child between 18 and 25 years who is financially dependant on you
  • A person who you are in an interdependent relationship with at the time of your death.

Tax may be payable on superannuation death benefits paid to a testamentary trust via your Will because the people who could potentially benefit from the testamentary trust (beneficiaries) includes people who would have to pay tax if they had received your superannuation benefits directly from your superannuation fund.

It doesn’t matter if the trustee of the testamentary trust intends to pass the ultimate benefit of the superannuation to those people or not, the mere fact that they could potentially benefit from the superannuation death benefits in the testamentary trust is enough to trigger tax on your superannuation.

If there are people who could receive your superannuation death benefits tax free, then additional tax can be avoided by including a superannuation proceeds trust in your Will. 

How does a superannuation proceeds trust work?

A superannuation proceeds trust is an optional testamentary trust that may be included in your Will. The executor of your estate has the choice to set up the superannuation proceeds trust, if they consider it to be appropriate at the time. 

The key difference compared to standard testamentary trusts is that a superannuation proceeds trust is designed to benefit a narrower range of people. Only the people who could receive your superannuation tax free are included as beneficiaries of the superannuation proceeds trust.

The table below sets out a comparison between the people who can benefit from a ‘standard’ testamentary trust in your will and the people who can benefit from the superannuation proceeds trust:

Testamentary Trust BeneficiariesSuperannuation Proceeds Trust Beneficiaries
Primary beneficiaries:
Spouse
Children
Grandchildren
Great grandchildren

Secondary beneficiaries:
Siblings
Parents
Grandparents
Nieces and nephews
Aunts and uncles
Cousins

Tertiary beneficiaries:
Related trusts
Related companies
Charities
Legal personal representative of other beneficiaries
Spouse
Former spouse
Children under 18
Children between 18 and 25 who are financially dependant
Financial dependant
Person in an interdependent relationship with you

Superannuation proceeds trusts are commonly used where you have a spouse or minor children.

If there are no people who could receive your superannuation death benefits tax free at the date of your death, then the superannuation proceeds trust will not be used.

Other than benefiting a narrower range of people, the superannuation proceeds trust operates in exactly the same way as standard testamentary trusts.

If you have any questions about superannuation proceeds trusts, please contact us to book an estate planning conference.

Related posts
It’s unusual, but sometimes a person dies without a will and without any relatives who would be entitled to the estate under the rules…
If you have a business, company, family trust or SMSF, estate planning usually includes preparing a written estate plan to help you and your…
Estate planning is about developing a strategy to ensures that your assets are distributed according to your wishes. A comprehensive estate plan will ensure…

Make an appointment

Arrange a consultation with one of our friendly and experienced team members.

Let us contact you

We will respond to your online enquiry within two business days.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
curae-13

Birman & Ride is now:

It’s only our name that has changed.
Curae Law is still operated by the same brilliant team and offers the same, quality services you know and love.