Funeral bonds and prepaid funerals

Funeral costs you pay for in advance normally don’t count in your assets test for payments from us. There are some exceptions.

Paying for funeral costs now

There are lots of good reasons to pay some or all of your funeral costs now. Most ways of paying for them don’t count in your assets test. In some cases we do count funeral bonds.

Burial plot

This is a specific spot or a right to a place at a general location such as an area of a cemetery.

How we assess burial plots

We don’t include a burial plot in your assessable assets, no matter what its value is.

You don’t need to tell us if you own one.

Prepaid funeral costs

This is where you arrange and pay for your funeral in advance. You can:

  • prepay the funeral director, or
  • buy a funeral bond and assign the benefit to the funeral director

Contract

When you pay for your funeral in advance you’ll need to get a contract that:

  • sets out the services you’ve paid for, and
  • states that there are no more costs to pay

How we assess prepaid funeral costs

As long as you have a contract that says you’ve paid in full for your funeral, your assessable assets for the assets test won’t include:

  • the amount you prepay to a funeral director, or
  • the amount you invest in a funeral bond that has been assigned to a funeral director

You only need to tell us about prepaid funeral expenses if you own a funeral bond.

Funeral bonds

We sometimes call funeral bonds funeral investments. These are managed investments that earn interest. Their specific features are:

  • the money must be in an independently managed funeral fund
  • the interest must be added to the capital
  • the fund can only release the money after your death
  • it can only do this to your estate or to the funeral director
  • it can only do this to pay for funeral costs

How we assess funeral bonds

Exempt bonds

Your funeral bond won’t count as an assessable asset if:

  • you have assigned it to a funeral director
  • it’s for fully prepaid funeral services
  • you have a contract that:
    • sets out the services, and
    • says they’re paid in full

We won’t include the value of up to 2 bonds as long as:

  • you don’t also have prepaid funeral expenses, and
  • the amount you’ve invested in the bonds is under the Funeral Bond Allowable Limit

Funeral Bond Allowable limit

As at 1 July 2017 the allowable limit is $12,750. It changes every 1 July.

If you jointly own a funeral bond, we count it as a single bond that you own. This means the Funeral Bond Allowable Limit is the same as for any other bond.

You and your partner can both invest in a single bond. The allowable limit for this bond is the same as for any other – not double.

Bonds that aren’t exempt

If your funeral bond isn’t exempt, we’ll count it as a financial investment. This means:

  • your share of the current value and interest is an asset
  • deemed income from the investment counts as your income

You should get a statement from the fund each year stating:

  • the bond’s current value, including any interest to date, and
  • when the bond’s value increases

If you have money in a number of funeral bonds, you can choose which 1 or 2 to make exempt. Your aim here is to keep the highest amount you can exempt from the assets test. We can help you work this out.

Tell us about your funeral bonds

You must tell us about any funeral bonds you own. You need to do this even if you know they’re exempt from the assets test.

If you know the bond is exempt

You need to tell us:

  • how much you and anyone else have invested in it
  • if you own it by yourself or jointly

If you don’t know it’s exempt

You need to give us documents that show:

  • the current value of the bond
  • the amount you and the other owner invested in it
  • if you own it by yourself or jointly
  • if you have a contract with a funeral director

Tell us about changes

If the bond is exempt

You don’t need to tell us if you earn interest from it.

You do need to tell us if:

  • you pay more money into the bond
  • you invest in another bond
  • the other owner of a bond you jointly own dies

If the bond isn’t exempt

You need to tell us if:

  • you pay more money into the bond
  • you invest in another bond
  • the other joint owner of a bond dies
  • the total value your financial investments including the funeral bond increases by $2,000 or more

Page last updated: 27 August 2017