Super death benefits

ATO updates guidance

The Australian Taxation Office (ATO) has refreshed its web guidance to emphasise that superannuation death benefits should be paid “as soon as possible” after death. There is no fixed six-month rule in the law. Industry updates note the ATO has removed earlier references that some readers took as a six-month timeframe. Trustees should review their processes to align with the current position. 

Under the Superannuation Industry (Supervision) Regulations, when a member dies the fund must cash the benefit “as soon as practicable”. That’s the legal test; it’s deliberately flexible so trustees can deal with real-world issues (probate, disputes, locating beneficiaries) without an arbitrary clock expiring. The regulations also confirm it’s acceptable to roll over the benefit “as soon as practicable for immediate cashing.”

The ATO’s page for superannuation professionals now clearly says you should make the payment as soon as possible after the member’s death. Its SMSF guidance sets out the steps for trustees (identify eligible recipients, determine components, calculate/withhold any tax) and how death benefits may be paid.

There is no legislated six-month deadline, and the ATO’s site no longer frames “as soon as practicable” as a set number of months. However, prolonged or unexplained delays can still breach the standards and attract audit attention. Document reasons for any delay (for example, awaiting probate or resolving a binding nomination dispute) and keep beneficiaries informed.

Who can be paid, and how

• Who: Benefits may be paid to dependants under super law (spouse, child of any age, someone financially dependent or in an interdependency relationship) or to the legal personal representative (the estate).
• Form: To eligible dependants, a death benefit may be paid as a lump sum, an income stream (death benefit pension), or a combination. To non-dependants, it must be a lump sum.
• Rollover: A trustee may roll over for immediate cashing to facilitate payment or pension setup.

Practical checklist for funds & SMSF trustees

1. Check the deed and nominations (including any binding death benefit nomination or reversionary pension instruction). 
2. Start the “as soon as possible / practicable” clock: open the file, record dates, and plan the steps to cash the benefit. 
3. Identify eligible recipients and decide on lump sum vs pension (and whether a rollover for immediate cashing is needed).
4. Document any obstacles (e.g., probate, competing claims) and keep clear notes to justify timing. Industry commentary confirms the ATO has moved away from a six-month “rule of thumb,” so your file notes matter.
5. Calculate components and withholdings if tax applies, then pay and report in line with ATO instructions.

At StandTo Legal, we advise funds, SMSF trustees and families on death-benefit strategy, timing and documentation, resolve nomination disputes, and set up death-benefit pensions correctly. If you’re unsure whether your current process meets the “as soon as possible/practicable” standard, we can review and update your procedures.

General information only, not legal advice. For guidance tailored to your situation, please contact StandTo Legal.