Your Will does not cover your superannuation
For most South Australians, superannuation is their largest single asset. It is also the asset most commonly left out of an estate plan.
Your Will only controls assets held in your own name. Your superannuation sits outside your estate entirely. Without a current Binding Death Benefit Nomination (BDBN), the trustee of your fund decides who receives it when you die. That decision may not match your wishes, your family’s needs, or what your Will says.
This is not a technical footnote to estate planning. It is one of the most consequential gaps our team finds in almost every estate plan we review.
Your options for directing your superannuation
As a member of a superannuation fund, you have several ways to instruct the trustee about your death benefit. Each carries different levels of certainty, flexibility, and legal effect.
Non-Binding Death Benefit Nomination
A non-binding nomination provides the trustee with a guideline only. The trustee is not obligated to follow it. They will take your wishes into account alongside other circumstances and factors, but the final decision is theirs. Unintended distributions can and do occur.
Binding Death Benefit Nomination (BDBN)
A Binding Death Benefit Nomination instructs the trustee to pay your death benefit to the people you nominate, in the proportions you specify. Where it is valid and current, the trustee must follow it. This is the clearest way to ensure your superannuation goes where you intend.
To be valid, a BDBN must be in writing and all nominated beneficiaries must be your dependants at the time of your death, or your legal personal representative (the executor of your Will). Eligible dependants include your spouse (including de facto), your children (including adult, adopted, and step-children), and any person with whom you have an interdependency relationship.
Public funds have lapsing BDBNs that expire after three years. If your nomination has lapsed, the trustee is no longer bound by it. Most people do not know their nomination has expired until it is too late to renew it.
Some industry funds do not offer binding nominations at all. Self-managed superannuation funds (SMSFs) generally do, though older fund deeds may require an amendment. Our team can advise on what is available within your specific fund.
Directing your superannuation to your estate
A valid BDBN can direct your death benefit to your estate, rather than to named individuals. This means your superannuation is then dealt with under your Will, which can allow non-dependants such as adult children or other people you care about to benefit. It also enables the use of testamentary trust structures for superannuation proceeds, which can provide significant tax and asset protection advantages.
Reversionary pensions
If you are already drawing a pension from your superannuation fund, a reversionary pension arrangement allows those income payments to continue to a nominated dependant after your death. A reversionary beneficiary can only be a spouse or former spouse, a child under 18, or a person with whom you had an interdependency relationship.
Self-managed superannuation funds
SMSFs are growing in popularity, particularly among small and medium business owners. They offer greater flexibility in investment strategy and death benefit planning, but they also carry specific succession risks that public funds do not.
When an SMSF member dies, control of the fund must pass to the remaining trustees or a new trustee. Without clear succession arrangements in the fund deed and associated documents, the wrong person may gain control of the fund, or disputes may arise between surviving members and the deceased’s estate.
Business owners with SMSFs face compounding exposure: succession of the business and succession of the fund may both be in question at the same time. Our team reviews both as part of a single, connected conversation.
Tax on superannuation death benefits
The tax treatment of a superannuation death benefit depends on who receives it and whether they are classified as a dependant under tax law. Payments to tax dependants, including spouses and children under 18, are generally tax-free. Payments to non-dependants, including adult children, may attract significant tax.
This means the way you structure your BDBN, and whether you direct your superannuation to your estate or to named individuals, can have a material effect on how much of your superannuation your family actually receives. Tax advice is essential alongside legal advice when making these decisions.
When a superannuation decision is disputed
If a beneficiary believes the trustee of a public fund has made an inappropriate distribution decision, they may apply to the Australian Financial Complaints Authority (AFCA) for a review. An application must be lodged within 28 days of the trustee’s decision.
AFCA does not have jurisdiction over self-managed superannuation funds. Disputes involving SMSFs are dealt with through the courts.
The most effective way to avoid a dispute is a valid, current, properly structured BDBN, prepared with experienced legal advice as part of a full estate plan.
What is at stake without a current nomination?
- The trustee of your fund decides who receives your largest single asset. That decision may not reflect your wishes or your Will.
- A lapsed nomination carries no legal weight. Your last instruction is treated as no instruction at all.
- A separated spouse may still be an eligible dependant and may receive your superannuation unless you have acted to update your nomination.
- Adult children receiving a death benefit as non-dependants may face a significant tax liability on what you intended as an inheritance.
- Without SMSF succession planning, control of the fund may pass to the wrong person at the worst possible time.
Get the full picture
Superannuation does not sit in isolation from your estate plan. It needs to be considered alongside your Will, your Binding Death Benefit Nomination, your trust structures, and your business interests, together, not separately.
Book a conversation with our team. No obligation. No pressure. Just a clear picture of where you stand and what needs to change.
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Download our plain-language guide: Superannuation & Death Benefits. Written for South Australians, not lawyers.