Australianbiz Accountants Q & A Forum

Without a binding death benefit nomination (BDBN), the trustee of a SMSF or industry superannuation fund has complete discretion as to who receives the death benefit between your dependants and legal personal representatives and in what proportion. Having a BDBN nomination in place ensures certainty as to how your death benefit is distributed, and, may also ensure less taxation impacts to your intended beneficiaries since certain beneficiaries will be taxed more favourably than others.

A BDBN can also be useful as an estate planning tool to ensure that the superannuation death benefit does not form part of your estate and in the process, avoid any delays associated with estate administration and avoid any risk of a possible family provision applications impacting the superannuation.

In making a BDBN, it is important to ensure that:

(a) you only leave your benefits to a death benefit dependent (and preferably, a dependent who will be taxed at lower rates).

(b) you ensure it remains current and does not lapse.

(c) you ensure it complies with all the formalities of regulation 6.17A of the Superannuation Industry (Supervision) Regulations 1994 (in writing, two witnesses etc).

An effective estate plan requires that you also effectively deal with superannuation entitlements, particularly since these entitlements can be the most major asset of the estate. You should therefore ensure you obtain appropriate legal and financial advice in respect of dealing with who receives your superannuation entitlements on death and minimising any taxation impacts.