Can I use superannuation to pay for a funeral?

The passing of a loved one is often unexpected, leaving many families unprepared for the cost of a funeral. According to Finder, the average funeral in Australia costs about $8,200. One of the questions that can come up during this time is whether superannuation can be used to help pay for funeral services.

In some cases, the answer is yes. Depending on the circumstances, funeral costs may be covered through early release of your own super on compassionate grounds, or through a death benefit paid from the deceased person’s super fund.

Funeral affordability is one of the biggest concerns for families we have supported at Bare. We’ve put together this guide to explain how it works, what to expect, and other options families may wish to consider.

Ways superannuation may help cover funeral costs

Depending on your circumstances, there are generally two ways superannuation may help with funeral costs.

The first is through early release of your own superannuation on compassionate grounds to help pay for the funeral of a dependant.

The second is through a death benefit payment from the deceased person’s super fund, which may help cover funeral expenses if you are eligible to receive it.

Using your own superannuation on compassionate grounds

Early release of superannuation on compassionate grounds

If there are not enough funds readily available, some people may be able to apply for early release of their own superannuation on compassionate grounds to help pay for the death, funeral or burial expenses of a dependant.

In Australia, superannuation is generally preserved until you reach your preservation age. However, the Australian Taxation Office lists death, funeral or burial expenses for a dependant as one of the limited circumstances where early release of super may be available.

It’s also important to understand that accessing your super early may have tax implications. Early release of super on compassionate grounds is generally treated as a super lump sum payment and may affect your taxable income for the financial year. Depending on your age and the taxable components of your super, tax may also be withheld from the amount released.

To apply, you must meet eligibility conditions, including that the person has recently died, your relationship with them meets the criteria of a dependant, and the expenses relate to their death, funeral or burial.

In many cases, the ATO will also want to understand whether there are other realistic ways the funeral expenses could be paid before approving early access to super.

For compassionate release purposes, a dependant can include a spouse, child, or someone who was financially dependent on you or in an interdependent relationship with you. An interdependent relationship generally refers to two people who had a close personal relationship and provided financial, domestic or personal support to each other.

The amount released is generally limited to eligible expenses, and supporting documents will usually be required as part of the application.

What funeral expenses can super cover?

If approved, early release of superannuation is generally limited to eligible expenses associated with the death, funeral or burial of a dependant.

According to the Australian Taxation Office, eligible expenses may include fees for burial or cremation, funeral director fees, fees for a minister, celebrant or member of a religious order, burial plot fees, coffin costs, cremation costs, transport of the deceased, flowers, death certificate fees, public advertising, costs for an urn, and ash interment fees.

Expenses that are generally not eligible include costs associated with a wake, headstone, monument, or other expenses that are not considered essential to conduct a funeral or burial. Pre-paying your own funeral expenses is also generally not eligible.

Because some funeral-related costs are excluded, it’s important to ask for an itemised funeral quote or invoice showing exactly what is being claimed.

How to apply for compassionate release of super

Applications for compassionate release of super are generally made through your myGov account linked to the ATO. 

Contact your super fund

Before applying, the ATO recommends contacting your super fund to confirm whether they will release your super early on compassionate grounds, whether you have enough money available to cover the expense and any tax, and whether accessing your super could affect any insurance linked to your account.

Gather supporting documents

You will usually need to provide supporting documents, such as proof of death and an itemised quote or invoice showing the funeral expenses being claimed. If your quote or invoice is missing information or doesn’t meet the evidence requirements, your application may take longer to process, additional documents may be requested, or the application may not be approved.

If the dependant is not your spouse or child under 18, additional evidence may be required to support dependency.

This can include evidence of financial support, shared living arrangements, or statutory declarations confirming the relationship.

Submit your application

Once you have the required documentation, you can apply through your myGov account linked to ATO online services.

The ATO will then assess your application before issuing an approval to your super fund.

Wait for approval

If approved, you’ll need to provide the ATO approval to your super fund so they can release the authorised amount.

How long does it take?

Processing times can vary depending on your circumstances and whether all required documents have been provided.

The Australian Taxation Office has advised that online applications submitted through myGov are generally processed faster than paper applications. In many cases, online applications may take around 14 days, while paper applications can take around 28 days or longer.

Once approved, your super fund may also require additional time to release the funds.

If funeral costs need to be paid urgently, it may be worth speaking with the funeral provider about available payment options while the application is being assessed.

Using the deceased person’s superannuation death benefit

A deceased person’s super fund may pay a death benefit to an eligible dependant or to their estate, depending on the fund rules and any nomination in place.

For many families, a death benefit payment from the deceased person’s super fund may be the first option to consider before accessing their own super. Because death benefit payments come from the deceased person’s super account, some families explore this option before using their own retirement savings.

If you believe you are the beneficiary of the deceased person’s super, or you are managing their estate, it is worth contacting the super fund as soon as possible to notify them of the death and ask about the next steps for claiming any benefit. You can also check whether the person had any ATO-held super.

Read more: When someone dies, what happens to their superannuation?

Alternatives to using super for funeral costs

Some families choose to explore other ways to manage funeral costs, including payment plans, lower-cost cremation services, prepaid funerals, funeral bonds, savings, insurance policies, or support from family members.

At Bare, we offer more affordable funeral options, as well as prepaid funerals for those who wish to plan ahead and help ease the financial burden on their family.

Our team can talk you through the funeral options available and help you find an approach that feels right for your family. If you have questions or would like to explore your options further, you can visit our All Services page or give our team a call on 1800 071 176.

Final thoughts on early access of superannuation to pay for a funeral

Early access of superannuation for funeral expenses can only be granted if there are no other means of covering these costs. Additionally, early release of superannuation on compassionate grounds may only be granted if funeral expenses have not been paid.

Before applying to use superannuation to pay for a funeral, you should understand release fees, tax and timeframes on early release of super. You should also be aware that releasing your super may have financial impacts. More information can be found on the Australian Taxation Office website. You should also consult a financial planner for specific advice on your personal or financial situation.

If you’re currently arranging a funeral and exploring your options, our compassionate team can help you understand the different funeral services available and what may work best for your circumstances. To learn more, visit our All Services page or call us at any time, 24/7, on 1800 071 176.

Disclaimer: This article provides general information only and does not constitute professional advice. Please consult a qualified expert for guidance specific to your situation.