Reader’s question. My super fund states it will pay my partner a lump sum anti-detriment amount on my death, in addition to any balance in my account.
But when my father died, his fund, Australian Super, told us that because he was receiving a pension there would be no extra payment to my mother other than his account balance, which will be paid as a lump sum.
Is this normal?
While it is not an obligation, many super funds make anti-detriment payments to a deceased member’s dependent beneficiaries. These payments are a refund of the 15 per cent contributions tax paid by a member over their working life. The entitlement has been available since the introduction of tax on super contributions in 1988.
Big benefit possible
Depending on a late member’s circumstances, this could be a large extra benefit given the dependants will receive all the 15 per cent tax the fund has paid on the member’s contributions, as an extra lump sum.
One fund that does make such payments is Australian Super. Australia’s biggest super fund. says chief executive Ian Silk. But your inquiry on behalf of your mother has highlighted what has up to now been an exception to the rule.
As Australian Super’s pensions are run on a different administration system to the accumulation section, it has not had a facility to calculate anti-detriment entitlements linked to pension balance death benefits.
The fund’s accumulation section has this capacity and members who die with
super in the savings stage get a refund of the 15 per cent contributions tax they paid. This same refund has not been offered to members in the pension phase because of a system constraint but it will be in future under an upgrade of the fund’s pension system, says Silk.
In the interim, if a member dies while their super is still paying a pension, any anti-detriment entitlement will be calculated on a manual basis for the relatively small number of members who are likely to be entitled to this extra payment.
Currently, only a small number of members take pensions and an even smaller number outlive them, which is when the lump sum anti-detriment entitlement becomes available. Silk says until it upgrades its pension administration system, Australian Super will calculate future anti-detriment payments manually.
How it all began
Anti-detriment payments are described as such because when the Hawke-Keating Labor government introduced a 15 per cent tax on contributions in 1988, it reduced the then 30 per cent tax on lump sum super payments by 15 per cent. It argued that rather than a new tax, the tax on contributions brought forward the lump sum tax.
This argument was found to be wanting when applied to lump-sum death benefits paid to financial dependants. such as a spouse, young (under 18) children or student children (under 25), as these benefits were always tax-free. Therefore, the introduction of the tax on contributions tax was considered detrimental, leading to the introduction of the anti-detriment payment as compensation.