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
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.
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