Binding Death Benefit Nominations
The Australian Taxation Office ("ATO") has recently released a draft self managed superannuation fund Determination (SMSFD 2008/D1) which examines how the laws governing binding death benefit nominations apply to self managed superannuation funds. The Determination is only a draft, but it is confidently expected it will become a final determination shortly.
This area of superannuation law has been the subject of debate for some time and the Determination should provide greater certainty for members of self managed superannuation funds in their estate and succession planning.
In the Determination, the ATO confirms that the various requirements in the SIS Regulations about making a binding death benefit nomination and when it is revoked do not apply to binding nominations made by members of self managed superannuation funds. The requirements regarding binding death benefit nominations apply only to members of other funds (eg, public offer funds).
This means that a member of a self managed superannuation fund can make an indefinite binding death benefit nomination that does not expire after three years, provided this is allowed by the fund's deed.
However, many deeds of self managed superannuation funds impose a three year expiry date on binding death benefit nominations, even though this is not required by law. Binding nominations made under some deeds may even be void for uncertainty because it is not clear whether they last for three years or indefinitely, or in many cases because of other weaknesses.
It is therefore critical that a self managed superannuation fund deed is reviewed and amended, if necessary to enable members to validly make indefinite binding death benefit nominations.
In any event, we recommend that members review their binding death benefit nominations every three years or so to ensure they remain appropriate for their circumstances.
It should also be noted that some self managed superannuation fund deeds typically provide that a binding death benefit nomination is automatically revoked when a "triggering event" occurs, such as divorce. If there has been such a triggering event, a review of the fund deed may be appropriate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
