August 2023 Newsletter
How super is your super and is it even yours?
Consider that these days if you are employed at least 11% of your wages goes into super, many people contribute more than that. This can add up over the years to a lot of money. It is important to know about your super and also where it is invested.
In this short newsletter we provide a little background about the super laws and ownership structure. We have and will provide more newsletters about the investment and tax advantages of super and you are of course welcome to contact us at any time with any questions.
You may think that your super is your super, but did you know that you don’t actually own your super?
You have an ownership interest in your super but you are not technically the owner. That is why your super earnings and expenses do not appear in your personal tax return.
The owner is the trustee of the super fund and the trustee pays tax on your super earnings on your behalf. You are the beneficiary, which means that you have quite limited rights. The trustee for a large super fund is usually an anonymous organisation or group of people who manage your super for you.
Superannuation falls under trust law which goes back 800 years and on top of that there are many further laws and regulations that specifically pertain to superannuation. Knowing your way around superannuation and trust law can be very beneficial and allows superannuation opportunities to be maximised.
One of the important things about super to understand is that, as you don’t own your super and the trustee owns your super, under certain circumstances the trustee can give your super away to a person of their choosing. If you haven’t told the super fund where your super should go when you die, the trustee has full discretion to whom to give your super. In most cases that will be your estate but sometimes it is somebody who claims to be your relative and the trustee pays that person.
You can stop this by signing a binding death benefit nomination. If the trustee has such a nomination and it is valid, then the trustee is forced to pay whom you have nominated so long as you have nominated a valid person or entity.
What is a valid person or entity? You can always nominate your estate or legal personal representative which is the executor of your estate. You can also nominate what is called a ‘superannuation dependant’, which is any child, a spouse or a person with whom you have an interdependency relationship (usually somebody with whom you live and with whom you share some or more income and expenses). You cannot name anyone else, not your siblings, parents, the local cat home, your favourite charity or anybody else. If you want these to get your super you need to nominate your estate as the beneficiary and give them the money via your Will.
Click here for our Fact Sheet on Super Death Benefit Nominations
The big benefit of nominating a person as your super beneficiary is that they get the money quickly and they can in some cases, if they so choose, keep the money inside the low-tax super environment. The trouble is if the beneficiary dies with or before you, it is back to trustee discretion where the money goes.
The disadvantage of going via your estate is that it can take 6 months or more until probate is granted, i.e. until the estate can safely be distributed.
Superannuation law is full of pitfalls and opportunities and good advice can make a big difference. This includes the opportunity to have life, income protection and disability insurance inside super and paid by super. There are also opportunities to choose your investments, which can be very handy as the trustees may not choose the optimal investments for you.
Please feel free to contact Christoph and the Team at any time with any questions about super, insurance, investment or any other financial or business matters
With love from the Team at In Your Interest Financial Planning
Christoph, Nicola, Marian, Deryk, Ann-Marie, Jessica, Alvin, Jade and Lin
Dr Christoph Schnelle
Financial Adviser and Life Insurance Specialist
Insurance ● Investment ● Super ● Retirement ● Aged Care
LRS GradDipFinPlan FAAA Member
Life Risk Specialist | SMSF Specialist Advisor
PhD Health Sciences and Medicine
MBiostats | GStat Graduate Statistician
Accredited Aged Care Professional
Accredited Estate Planning Professional
Authorised Representative 308223