Previously I have briefly mentioned some of the complexities involved with the administration of Superannuation benefits in Australia.

Superannuation is compulsory in Australia employees of whatever level of employment and as a result a certain part of the salary is paid out into a superannuation fund by their employer. Most of these have as part of their benefits a life insurance component, which is often a substantial sum.

However, the payment of these benefits including the insured component does not follow the normal “estate” distribution arrangements. The benefits do not automatically for part of the estate. They are normally payable to a person who has been nominated by the deceased member to receive the benefit, any dependents and inter-dependents and finally if none of these exit to the estate of the deceased member.

In many cases the nomination is left blank on the false belief that the ‘family’ will get it or it will be looked after under the Will. If this is the case the funds trustees then look to who may be dependents. Dependents do not have to be financially dependent and include a spouse or children. Interdependency can include those who have a close personal relationship, that also live together, they also must provide the other with financial support and they must provide the other with domestic support. Where there are several people fitting into these categories then the fund trustees can “decide” who receives the benefits and split the benefits amongst different recipients in a manner they see fit. Financial dependency does not need to be full and major financial support but rather nay regular type of payments to help out can be considered to be meritorious in proving to be a dependent.

Problems arise where there are more than one claimant and they have different classifications. In particular recent examples of where the deceased members were separated but not divorced have highlighted problems with the Act and the way in which superannuation benefits are distributed.

In one case where no interdependency existed the trustees made the benefit payment to the ex wife who had a long running issue with alcohol and drugs and ignored the please of the mother and other family members of the deceased, despite their being separated for a few years prior to the death. Even the administrator of the super fund agreed that this was not a desirable outcome and they realised the money would more than likely be wasted.

In another recent more complicated case reported by the Superannuation Complaints Tribunal, the tribunal actually overturned the trustee’s decision to pay the deceased’s benefits to the mother and instead reverted the benefits to the ex-spouse. In this case the deceased had subsequent to separating was diagnosed with Cancer. In the intervening period between that and her death she had sent a Change of Details form to her fund (which was not received) where she wrote “See Will” as her preferred beneficiary. Further in her Will she had specifically wished that her husband not benefit due to their break up. She had just prior to her death moved back with her mother who cared for her until her death about 2 months later. The trustees considered that the mother met the interdependent rules and made the decision to pay the benefit to the mother.

Of course, the still officially married spouse appealed to the tribunal. The tribunal agreed that there was no doubt as to there being a close personal relationship however they did not agree that they lived together as they did not think it was because of their future commitment together but because of the tragic circumstances. The whole benefit was paid to the spouse.

There are no simple answers to what should be done in the management of the affairs of your superannuation, only to be more vigilant in regularly reviewing all of your own personal circumstances, just as should be done for your normal estate.

What can you do from New Zealand? If you have any client mention a relative living and working in Australia, mention to them they should discuss what arrangements they have for their Superannuation benefits.

PS. If anyone knows “our” Robbie, you may want to tell him too!

PUBLICATION: ENVOY – The newsletter of The New Zealand Institute of Legal Executives
DATE: November 2008
AUTHOR: Andrew Johnstone, APEARS, Sydney, Australia

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