Binding Death Benefit Nominations Recent Court Case

The Queensland Supreme Court has recently had to consider whether a member’s nomination in relation to his superannuation account constituted a binding death benefit nomination.  The nomination was made in respect of a self managed superannuation fund.

The Court held that as the nomination made by the member did not use the term “Binding”, and did not direct or require the trustee to apply the account in a particular manner, the nomination was not a binding nomination.

The moral of the case: if you wish to make a binding nomination it is a good idea to use the word “Binding” and direct language such as “I direct the trustee to apply my benefit on my death as follows .....”.

Another issue which arose in the Case was whether (on the assumption that the nomination was binding) the nomination was defective because the nomination was not made in the manner set out in SIS Regulations.

On this issue the Court concluded that the trust deed of the superannuation fund expressly incorporated the SIS Regulation requirements relating to binding death benefit nominations and that nomination would have been defective if it had been binding.

This decision is not inconsistent with the recent ATO Determination on Binding Death Benefit Nominations in self managed superannuation funds.  The SIS Regulation requirements as to binding death benefit nominations do not apply to self managed superannuation funds unless the governing rules of the particular superannuation fund adopt or incorporate those requirements.

In the Queensland case the Court held that the governing rules did in fact expressly incorporate the SIS requirements.

The case is Donovan v Donovan [2009] QSC 26.