Your nominated beneficiary: Get it right

The beginning of a new financial year is a good time to check your super to be sure you have nominated a beneficiary. At NGS Super the Claims Review and Insurance Committee looks at all claims with a special focus on claims where a deceased member has not nominated a beneficiary or where there is a dispute about the distribution of a death benefit or where the named beneficiary is ineligible to receive the benefit.

The Trustee has an overriding legal obligation to pay the benefit, which may include an insured component, to the correct recipient. This is governed by the Superannuation Industry (Supervision) Act 1993 (SIS Act).

The Act defines the eligible recipients as a spouse, child (any age) and anyone in an interdependency relationship with the deceased member at the time of death. ‘Interdependency’ includes ‘a close personal relationship’, ‘they live together’, ‘one or each of them provides the other with financial support’ and ‘one or each of them provides the other with domestic support’.

A general rule of thumb for the Trustee is: who would have benefited if the member had not passed away. There are different tax treatments for the differing categories. For example a child who is a minor or a child still living at home while at university would pay no tax on the benefit. An independent adult child, however, would be required to pay tax on the benefit.

In line with their fiduciary duty, the Trustee must look at the circumstances of the deceased at the time of death. First and most importantly, did the member nominate a beneficiary and if so was it a binding or non-binding nomination? Valid binding nominations remove any discretion the Trustee may have in relation to the distribution.

If valid, it must be paid to the named recipient. NGS Super offers two types of binding death nominations: a three-year binding nomination which must be renewed and an ongoing binding death nomination which does not have to be renewed; as it is perpetual. Binding nominations provide certainty as to the intentions of the deceased.

If the nomination is non-binding or if there is no nomination, the Trustee must investigate the personal circumstances of the deceased at the time of death. First, the Trustee will look at the provisions in the will to determine what the member wanted. They will also look at the date of the will to see if it is current. A will is very helpful as a guide, but not binding on the Trustee.

Other information that is relevant concerns the living situation of the deceased such as children, marital/de facto status and interdependency relationships. The death certificate will be considered. Potential claimants will be contacted to find out if they intend to make a claim on the benefit and the appropriate forms will be provided to them. In the case of a non-binding death nomination, the Trustee has discretion as to who receives it in line with the requirements of the SIS Act.

The reason for this is that members’ circumstances change. For example, a member may have nominated his/her spouse 15 years previously, but with the breakdown of the relationship the member may have started a new family and has two young children at the time of death. In that case, the Trustee would disregard the earlier nomination and pay the benefit to the current spouse and/or set up a trust for the children.

So, it is important to make sure you have made a nomination in order to clarify who you wish to receive your superannuation/insurance benefit.

Binding nominations are powerful and it should be noted that binding nominations can be made in favour of your estate. In that case the superannuation death benefit would be paid to your estate then distributed in terms of the provisions stipulated in your will. It’s clean, accurate and provides certainty. All forms can be downloaded at

Bernard O’Connor
(former NGS Super Company Secretary)
(Important information: The information in this article is general information only and does not take into account your objectives, financial situation or needs. Before making a financial decision, please assess the appropriateness of the information to your individual circumstances, read the Product Disclosure Statement for any product you may be thinking of acquiring and consider seeking personal advice. Past performance is not a reliable indicator of future performance. Any opinions are those of the author and do not necessarily reflect the view of NGS Super.)