Superannuation is a crucial part of any financial plan, but many Australians overlook an essential aspect of their superannuation fund: nominations. These play a pivotal role in determining who will receive your super benefits in the event of your death.
There are two types of binding nominations in superannuation: Binding Death Benefit Nominations (BDBN) and Non-Lapsing Binding Death Benefit Nominations. Both of these serve a similar purpose, but they function somewhat differently.
Binding Death Benefit Nominations (BDBN)
A BDBN is a legally binding nomination that directs the trustee of your superannuation fund on how to distribute your superannuation benefits in the event of your death. This nomination lasts for three years, after which it expires if not renewed. It allows you to have control over who receives your benefits and bypasses the discretionary decision-making power of the trustee.
Non-Lapsing Binding Death Benefit Nominations
Unlike a BDBN, a Non-Lapsing Binding Death Benefit Nomination does not expire after three years. Many superannuation funds now offer this option, providing peace of mind that your nomination remains valid indefinitely. However, it’s crucial to review and possibly update this nomination regularly, especially after life events such as marriage, divorce, or the birth of a child.
What Happens When There is No Nomination?
When there is no binding nomination, the superannuation trustee has the discretion to determine who receives your death benefits. This process could be time-consuming and may not reflect your personal wishes. Therefore, a binding nomination can be an essential tool to ensure your benefits are distributed according to your preferences.
Who Can Be Nominated?
Under the superannuation industry legislation, specifically the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act), you can nominate the following as beneficiaries:
Your spouse, including de facto partners.
Your children, regardless of age.
A person who is financially dependent on you.
A person in an interdependency relationship with you.
Your legal personal representative (executor or administrator of your estate).
It’s important to note that tax implications can vary depending on who you nominate. For example, dependents under tax law (such as a spouse or children under 18) typically receive benefits tax-free, while non-dependents may be subject to tax.
While this blog is specific to Victoria, the same rules generally apply across Australia as superannuation is governed by federal legislation. However, it’s always best to consult with a legal expert, like those at our firm, to understand the implications of your decisions fully.
In conclusion, planning for the future is not just about wealth accumulation but also about how you distribute your wealth. If you need help in making an informed decision about your superannuation nominations, do not hesitate to reach out to our team. Our experienced professionals are here to guide you every step of the way.