Choosing a Self Managed Super Fund (SMSF) can be a huge step for any Aussie in taking control of their own Superannuation, but one important step is to set up your nomination in case of your passing.
When setting up an SMSF, nominating your death benefit will determine what happens should you pass.
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|Advertised rate||Comparison rate||Monthly repayment||Rate Type||Offset||Redraw||Ongoing Fee||Upfront Fees||LVR||Lump Sum Repayment||Additional Repayments||Pre-approval|
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SMSF 80 Fixed 5 Years (Purchase) (New Customer)
Liberty SuperCredit SMSF (LVR < 60%)
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Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given Rates correct as of October 23, 2021. View disclaimer.
What is a binding death benefit nomination?
When a self-managed super fund (SMSF) member dies, the SMSF generally pays a death benefit to a dependant or other beneficiary of the deceased.
If the recipient is a dependant of the deceased, the death benefit can be paid as a lump sum or as a steady income stream. The income stream can be new or a continuation of an existing stream.
The ATO states: SMSF members can nominate who will get their benefits when they die. A binding death benefit nomination directs the trustee to pay the benefit to a legal personal representative or a dependant.
If the recipient is not a dependant of the deceased, the death benefit must be paid as a lump sum.
Who is a dependant?
To understand how death benefits can be paid you need to know who is a dependant.
A person is a dependant of a deceased member if, at the time of death, that person was:
The deceased's spouse.
A child of the deceased – this includes a child younger than 18 years, or a child who was financially dependent on the deceased and younger than 25 years, or if the child has a disability.
In an interdependency relationship with the deceased – this is a close personal relationship between two people who live together, where one or both provides for the financial, domestic and personal support of the other.
How are dependants paid?
Benefits paid as a lump sum to a dependant are tax-free but a lump sum paid to a non-dependant will be taxed.
Lump sums can be paid in cash or non-cash form - for example, shares or property.
The trustee may need to withhold tax from a death benefit. Working this out can be complex and will depend on a number of factors. If a trustee has to withhold tax, they must register for PAYG withholding and complete some other ATO forms.
Members of the SMSF may have made a death benefit nomination asking the SMSF trustees to pay their death benefit to their nominated beneficiaries. While having regard to the member's nomination, the SMSF trustees must ensure the nominated beneficiaries are entitled to receive death benefits under the trust deed and super law.
If the deceased member did not nominate a beneficiary, the trustee may pay it to the deceased's estate for the executor to distribute it according to the instructions in their will.
It's wise to plan ahead. If there is a dispute over the payment of death benefits which can't be resolved, it may lead to costly court action. Seeking out professional advice and referring to the ATO website will help you understand the process.
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