Your will does not control your superannuation. Super is held in trust by your fund, and unless you have a valid binding death benefit nomination in place, the trustee — not your will — decides who receives it and in what proportions when you die. Here’s how binding nominations work, the difference between lapsing and non-lapsing, and the tax your beneficiaries could pay depending on how you set it up.
Why your super isn’t covered by your will
As the ATO confirms, superannuation is legally held by your fund’s trustee, not owned by you directly, which is why it sits outside your estate unless you specifically direct it there. When you die, the trustee decides who gets your death benefit — guided by superannuation law, your fund’s trust deed, and any nomination you’ve made. If you haven’t made a valid nomination, that decision is entirely the trustee’s, based on who they determine was financially dependent on you.
Binding death benefit nomination vs non-binding
- Binding nomination — if valid, the trustee is legally required to pay your death benefit exactly as you’ve directed.
- Non-binding nomination — the trustee considers your wishes but retains full discretion, and can pay someone other than who you nominated if they judge that person a dependant.
- No nomination at all — the trustee decides from scratch, based on superannuation law’s definition of dependant, which may not match who you’d have chosen.
Lapsing vs non-lapsing: the detail that catches people out
A standard binding nomination is lapsing, meaning it expires after three years unless you renew it. Once it lapses, your fund’s trustee regains full discretion — quietly, with no dramatic notice, just an expired form sitting on file. A non-lapsing binding nomination, where your fund’s trust deed allows it, remains valid indefinitely until you change or cancel it. Not every fund offers the non-lapsing option, and SMSFs handle this differently again — many SMSF trust deeds allow non-lapsing nominations with no automatic expiry at all, but this depends entirely on how the deed is written.
Who can you actually nominate?
A binding nomination is only valid if it names a superannuation dependant or your legal personal representative (your estate). Superannuation law defines a dependant as your spouse (including de facto), your children, anyone in an interdependency relationship with you, or anyone who was financially dependent on you at the time of death. Naming someone outside these categories — a friend, a niece who wasn’t financially dependent on you — makes the nomination invalid for that person.
The tax difference between dependants and non-dependants
This is where the nomination decision has real financial consequences, separate from who ultimately receives the money. A lump sum death benefit paid to a tax dependant (broadly, a spouse, a child under 18, or someone financially dependent on you) is entirely tax-free. Paid to a non-dependant — commonly an adult child — the taxable component is taxed at up to 17% (including the Medicare levy) on the taxed element, and up to 32% on any untaxed element. The tax-free component is never taxed, regardless of who receives it.
| Beneficiary | Tax on death benefit |
|---|---|
| Spouse or child under 18 | Fully tax-free, regardless of components |
| Adult child (non-dependant) | Tax-free component: nil tax. Taxable component: up to 17% (taxed element) or up to 32% (untaxed element) |
This is why many people with adult-child beneficiaries look at strategies like directing the benefit through the estate, or a testamentary trust, rather than nominating the adult child directly — the right approach depends on your family situation and is worth confirming with an adviser rather than assuming.
When your nomination can become invalid without you realising
- A lapsing nomination simply expires after three years if it isn’t renewed.
- Marriage or starting a de facto relationship can override an existing nomination under some fund rules.
- Separation or divorce doesn’t automatically remove an ex-partner as beneficiary — you need to actively update the nomination.
- The birth of a child, or a change in who’s financially dependent on you, isn’t reflected automatically.
FAQ’s for Binding death benefit nomination vs non-binding
Does my will decide who gets my super?
No, not unless you’ve specifically nominated your legal personal representative (your estate) as the beneficiary of your super. Otherwise, your super is paid directly according to your fund’s nomination rules, separate from your will.
How often do I need to renew a binding nomination?
A standard lapsing binding nomination needs renewing every three years or it expires. A non-lapsing binding nomination, if your fund allows it, doesn’t need renewal — but should still be reviewed after major life events like marriage, divorce, or a new child.
Will my adult children pay tax on my super?
Potentially, yes. Adult children are generally non-dependants for tax purposes, so the taxable component of a death benefit paid to them can be taxed at up to 17% (or up to 32% for any untaxed element), even though the same benefit would be tax-free to a spouse.
Not sure whether your current nomination is still valid, or what your beneficiaries would actually receive after tax? Talk to our Adelaide succession planning team about reviewing your nomination and broader estate strategy.
