When a binding super nomination lapses or fails: who gets the death benefit and how to complain

A binding death benefit nomination directs a super fund trustee to pay your death benefit to the dependants or legal personal representative you name. Under the SIS Regulations (reg 6.17A) a standard binding nomination must be in writing, signed in front of two adult witnesses who are not nominated beneficiaries, and it lapses after 3 years unless it is confirmed or the fund offers non-lapsing nominations under its trust deed. If the nomination has lapsed, names someone who is not a dependant at your death, or was not properly witnessed, the trustee generally decides who receives the benefit under the trust deed, choosing among your SIS dependants and your estate. That decision can differ sharply from what you intended, and the tax can differ too. Complaints about trustee decisions go first to the fund and then to the Australian Financial Complaints Authority (AFCA), within strict time limits.

This guide is general information, not financial advice. Rules for self-managed funds depend heavily on the fund's deed.

Why nominations fail

Who can be nominated

Only SIS dependants or your legal personal representative (your executor or administrator):

• a spouse, including a de facto partner
• a child of any age, including an adopted child, a stepchild and a child of your spouse in some cases
• a person financially dependent on you
• a person in an interdependency relationship with you

A brother, a friend or a charity cannot be nominated directly. If you want them to benefit, nominate your legal personal representative and leave the benefit to them in your will.

How trustees decide without a binding nomination

The trustee must follow the fund's deed and act fairly. Typically it:

1. identifies potential beneficiaries (dependants and the estate)
2. invites claims, often with a deadline, and gathers evidence of relationships and dependency
3. considers any non-binding nomination as a guide
4. makes a proposed decision and gives potential beneficiaries a chance to object
5. makes a final decision and pays

The process can take months. Disputes are common in blended families.

Worked example (illustrative)

Kerry, 61, lives in Victoria with her partner of 4 years, Ross. She has two adult children from her first marriage. In 2020 she signed a lapsing binding nomination: 100% to her two children. She died in 2026, so the nomination had lapsed in 2023. Her super balance, including insurance, is $520,000.

• With a valid nomination, the children would receive $260,000 each. As non-dependants for tax, they would pay tax on the taxable component (for illustration, $480,000 taxed element × 17% = $81,600 in total).
• With the nomination lapsed, the trustee considers Ross (de facto spouse), the children (SIS dependants) and her estate. Many trustees would pay a substantial share to Ross, the financially interdependent partner, for whom the benefit is tax-free.
• The children may complain. Ross may also have a family provision claim against her estate in Victoria within 6 months of the grant, but super paid directly to him is not part of the estate there.

Whatever the outcome, the family faces months of uncertainty that a renewed nomination would have avoided. Try the tax effect in the super death benefit tax estimator.

NSW: notional estate

In NSW, a super benefit paid directly to someone under a nomination (or a trustee decision) can sometimes be designated notional estate in a family provision claim, so a child left out can still claim against it. See family provision claims.

Self-managed super funds

SMSFs are not bound by the standard lapsing rule in reg 6.17A in the same way as public offer funds, as courts have held that the deed governs. That flexibility is also a risk. Common SMSF problems:

• the deed requires a specific form or delivery method that was not followed
• after the member's death, the surviving trustee (often a second spouse or one child) controls the payment decision
• the member's attorney signed or changed the nomination without clear authority

If you have an SMSF, have the deed and nomination reviewed together, and consider who will control the trustee after your death.

Complaining to the fund and AFCA

1. Make a written complaint or objection to the fund within its stated period.
2. If unresolved, complain to AFCA. For death benefit decisions there are strict time limits (Corporations Act 2001, s 1056): if the trustee gave you notice of its proposed decision and you did not object within 28 days, and then gave you notice of its decision, you must complain to AFCA within 28 days of that second notice or lose the right to complain. Check the notices you receive and AFCA's rules.
3. AFCA can affirm the trustee's decision or substitute its own. It is free for consumers.

SMSF disputes generally cannot go to AFCA and may need a court.

Prevention checklist

• Check every fund's nomination type and expiry date today.
• Renew a lapsing nomination before it expires, or switch to a non-lapsing one if offered.
• Use two independent adult witnesses who are not beneficiaries.
• Update after any relationship change.
• Coordinate the nomination with your will, especially if you nominate your estate.

FAQ

Does my will override my binding nomination?

No. A valid binding nomination binds the trustee, regardless of your will.

Can my attorney make a nomination for me?

It depends on the fund's rules and the power of attorney. It is a contested area; get advice.

What if I want my super to go to my estate?

Nominate your legal personal representative. The will then governs it, with the tax and estate-claim trade-offs explained in the super death benefit tax worked example.

Sources

• Federal Register of Legislation — SIS Act 1993; SIS Regulations 1994, reg 6.17A
• Australian Financial Complaints Authority — super death benefit complaints and time limits
• Australian Taxation Office — SMSF and death benefit guidance
• Related: estate mistakes overview, missed time limits