A closer look at the VAD Act: Superannuation and insurance

The Voluntary Assisted Dying Act 2021 (the Act) was passed by the Queensland Parliament in a historic vote on 16 September 2021 and received royal assent on 23 September 2021.

This made Queensland the fifth Australian jurisdiction to legalise voluntary assisted dying (VAD), joining Victoria, Western Australia, South Australia and Tasmania. The VAD scheme will become operational on 1 January 2023.

This article is the first of a series that will provide practitioners with a breakdown of what to expect once the VAD Act comes into operation in Queensland. This article looks at how the Act interacts with current laws relating to superannuation and insurance.

Superannuation

A superannuation death benefit may be released to a dependent beneficiary or to the trustee of a deceased estate after the superannuation fund member has died.1 The conditions for the release of superannuation benefits, including death benefits, is governed by the Superannuation Industry (Supervision) Regulations 1994 (Cth) (the superannuation regulations).

The superannuation regulations allow for the early release of a person’s superannuation if the person is diagnosed with a terminal medical condition. Importantly, however, the superannuation regulations provide that a “terminal medical condition” will only exist if (among other requirements):

  • two registered medical practitioners have certified, jointly or separately, that the person suffers from illness, or has incurred an injury, that is likely to result in the death of the person within a period that ends not more than 24 months after the date of the certification, and
  • at least one of the registered medical practitioners is a specialist practising in an area related to the illness or injury suffered by the person.2

In contrast, the VAD Act does not require either of the two medical practitioners who assess the patient’s eligibility to access the VAD scheme to be a specialist in the person’s illness or condition.

As the early release of superannuation due to terminal illness is a lump sum benefit that is paid tax-free under the Income Tax Assessment Act 1997 (Cth),3 persons wishing to access the VAD scheme need to consider whether it is advantageous to have the benefit paid as a terminal illness benefit, as opposed to being paid out after death, which can incur taxes.

Insurance

The death of a person through the VAD scheme raises questions as to its impact on access to life insurance or the receipt of a death benefit from a superannuation fund.

There are three key categories of insurance in Australia: health, life, and general insurance. The most important insurance in the context of VAD is life insurance, which covers a variety of products that provide payment upon death or injury.

The insurance industry is governed at the Commonwealth level by two primary pieces of legislation: the Insurance Act 1973 (Cth) and the Insurance Contracts Act 1984 (Cth).

In relation to life insurance, s228 of the Life Insurance Act 1995 (Cth) provides that “(a) life company may only avoid a life policy on the ground that the person whose life is insured by the policy committed suicide if the policy expressly excludes liability in case of suicide”. In other words, insurers may expressly exclude cover for suicide. However, the Life Insurance Act 1995 (Cth) does not provide a definition of ‘suicide’.

Under this legislative framework, the policy terms and conditions are a private contractual matter between the insured person and the insurer. While insurance policies differ across Australia, generally life insurance companies will not cover suicide until after a specified exclusion period.

Life insurance policies may also cover terminal illness. Terminal illness cover, sometimes known as an ‘advanced death benefit’ is a lump sum payment made to nominated beneficiaries where the person has less than 12 months to live. Individual life insurance policy terms and conditions will dictate whether an advanced death benefit is payable.

To address this, the VAD Act makes an important distinction between death by suicide and death by VAD. Section 8 of the Act explicitly provides that “a person who dies as the result of the self-administration or administration of a voluntary assisted dying substance in accordance with this Act:

  • does not die by suicide; and
  • is taken to have died from the disease illness or medical condition … from which the person suffered.”

Additionally, s81 of the Act directs any medical practitioner who is required to give a cause of death certificate for a person who accessed VAD to:

  • state that the cause of death was the disease, illness or medical condition that allowed the person to become eligible for VAD, and
  • not include any reference to VAD in the cause of death certificate.

These provisions are intended to ensure that accessing VAD does not affect life insurance policies or the receipt of a person’s death benefit from their superannuation fund. This is because, ultimately, the person’s underlying illness is to be treated as the person’s cause of death.

Nevertheless, until case law provides clarity on this emerging area, it is unclear how the legislation will impact upon insurance policies, suicide exclusion clauses, and superannuation death benefits.

For more information about the operation of the Act, see our earlier article.

Brooke Thompson is a Queensland Law Society Policy Solicitor.

Footnotes
1 Income Tax Assessment Act 1997 (Cth) s307-5(4); Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 6.17A.
2 Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 6.01A, 6.19A, sch.1 ‘terminal medical condition’.
3 Sections 303-10, 995-1.

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