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Making death benefit nominations work for you

A recent High Court decision has confirmed that traditional binding death benefit nominations do not need to apply for SMSFs. In this article we will review the rules and practical application of death benefit nominations in both SMSFs and retail and industry funds.

Nomination types

Superannuation funds offer a range of death benefit nominations including:

  • Binding death benefit nominations
  • Non-lapsing binding death benefit nominations
  • Non-binding death benefit nominations
  • Member directed nominations in small funds

Binding nominations

A binding nomination can provide certainty as to who will receive the member’s death benefit. Under this type of nomination, members can nominate the person(s) to whom their death benefit will be paid. Superannuation law requires that the following conditions must be met:

  • The trustee must give the member sufficient information to understand the nature of a binding nomination
  • The nomination must nominate a superannuation law dependant
  • The nomination must be in writing
  • The nomination must be signed and dated in the presence of two witnesses
  • The witnesses must be over 18 and not a nominated dependant or legal personal representative
  • The nomination must be clear and unambiguous
  • If the nomination is not clear, the trustee must seek clarification as soon as practicable
  • The nomination expires after three years
  • The nomination may be amended or revoked

Non-lapsing binding nominations

Non-lapsing binding nominations have increased in use in retail funds in recent years. The nomination must be in writing but does not have to be witnessed and does not expire after three years.

These nominations require the trustee to actively consider and consent to the nomination. The trustee will generally consider whether the nomination is intended to be enduring and that the member does not intend for the nomination to ever expire. For example, if a spouse or the member’s estate is nominated, the trustee could reasonably conclude that the member intended for the nomination to never expire.

Non-binding nominations

A non-binding nomination is an expression of wishes which is not binding on trustees. The trustee will exercise discretion to determine the recipient of the death benefit but will take the nomination into account when exercising this discretion.

Where the death benefit is to be determined by trustee discretion, the trustee is required to undertake a claim staking process to identify potential beneficiaries and inform them of the trustee’s intentions as to how the death benefit will be distributed.

Potential beneficiaries include anyone who meets the superannuation law definition of dependant. The potential beneficiaries have 28 days to object to the trustee’s intention. If a potential beneficiary objects to the intended distribution, the trustee must obtain further information about the potential beneficiaries’ level of dependency, reassess their decision and recommence the claim staking process.

Except for SMSFs, if potential beneficiaries are dissatisfied with the trustee’s decision, they may lodge a formal complaint through the fund’s internal complaints process. They can also make a complaint to the Australian Financial Complaints Authority (AFCA).

SMSF member-directed nominations

SMSFs and small APRA funds (SAFs) are exempt from the provisions of superannuation law which prohibit a person who is not a trustee from exercising discretion as to who will receive the death benefit.

Members of SMSFs and SAFs can incorporate certainty in the nomination of beneficiaries using a clause in the fund’s trust deed. Such a clause would typically state that if a member nominates a valid dependant, the benefit shall be paid to them.

The High Court of Australia recently ruled in the case of Hill v Zuda Pty Ltd [2022] that the traditional three-year lapsing binding death benefit nominations do not need to apply to SMSFs. Whilst this view has been widely held, this is the first time that the courts have definitively clarified the matter, which has been welcomed.

SMSF trust deeds

In an SMSF, it is essential to review the fund’s trust deed to determine the rules regarding death benefit nominations. Although the High Court has ruled that traditional death benefit nominations do not apply to SMSFs, many trust deeds expressly include the traditional requirements. If this is the case, they must be complied with, and the nomination will lapse.

It is also important to review other SMSF trust deed requirements. It is common for trust deeds to provide an appendix or schedule that sets out the death benefit requirements, often in the form of a template. Any nomination that doesn’t meet the requirements would not be valid.

Many SMSF trust deeds also contain specific provisions regarding how the nomination must be given to the trustee and/or whether the trustee must accept a nomination prior to a member’s death.

No nomination

Where a member of any super fund has not made a nomination, the fund must have rules for determining the death benefit recipient(s).

Some funds will exercise discretion and follow the same process as if a member had a non-binding nomination.

However, many funds have automatic provisions that require the benefit to be paid to the legal personal representative. If a member does not have a will, their benefit would be distributed under the relevant state laws for dealing with intestacy. This is also particularly important for members who don’t have legal capacity to make a will but for whom the distribution of a death benefit under the laws of intestacy would result in unjust outcomes.

Case study – Pia

Pia was involved in an accident and no longer has mental capacity. He has not made an enduring power of attorney or a Will, nor has he completed a superannuation death benefit nomination.

He received a $1 million compensation payment that was paid to his super.

Following his injury, he lived with his father who is his full-time carer. His mother abandoned them both. Pia has never married and has no children. If Pia were to die and his superannuation benefit was paid to his estate, in most states, each of his parents would receive half of his super. If Pia was a member of a fund where the trustee was able to exercise discretion, it is likely that his father would qualify to receive all the benefit.

Invalid or partially invalid nomination

A death benefit nomination can never bind a trustee to make a payment to a person who does not meet the definition of a superannuation law dependant. In many instances, a person may have been an eligible dependant at the date of nomination but is not at the date of death.

In this respect it is important to understand what the fund rules are in respect of invalid nominations. Common options are for the benefit to be required to be paid to the legal personal representative or alternatively for the trustee to have discretion. Where multiple beneficiaries have been nominated but only one is invalid some fund rules state that the whole nomination is invalid whereas other fund rules will determine that only the portion of the non-dependant’s nomination is invalid.


Understanding the types of nominations offered by different funds can help members to ensure they are in a fund that offers death benefit nominations that suit their personal circumstances.


Julie Steed is Senior Technical Services Manager a Australian Executor Trustees. This article is in the nature of general information and does not consider the circumstances of any individual.



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