Superannuation Death Benefits – Why You Should Still Post that Form
The recent Federal Court case of Lynn v Australian Financial Complaints Authority [2025] FCA 175 provides another example of the uncertainty that can occur when a non-binding death benefit nomination is made.
In this case Mr Lynn nominated (to his APRA-regulated large superannuation fund) his four children and two step children (who were adults) to receive his superannuation and life insurance proceeds on his death. When he passed away, his superannuation fund decided to give Mr Lynn’s benefits to his estranged wife, Ms Lynn. One of the children complained to the Australian Financial Complaints Authority (“AFCA”). AFCA, after considering the evidence of several parties, determined that Ms Lynn (due to her financial dependency on her estranged husband) should receive 50% of the benefits and the children were to share the rest. Ms Lynn appealed to the Federal Court who dismissed her appeal.
Mr Lynn had advised the fund to give all his benefits to his children and the fund decided to give them nothing. It was only after the AFCA process that they were entitled to receive half. How did this happen? In short, the death benefit nomination wasn’t binding on the fund.
Most of us know that we can nominate who receives our superannuation death benefits when we die. However, it is important to note that there are two types of nominations:
- non-binding – which can usually be made by filling in an online form; and
- binding – which involves completing a paper form, signing it in front of two witnesses and posting it to the fund.
A specific fund’s rules may not allow both of the above, but for the purposes of this article let’s assume they do.
Your fund isn’t required to follow a non-binding nomination.
As the law requires a binding nomination to be signed by two witnesses, any nomination that has been made online cannot be binding.
Even though it takes extra effort to make a binding nomination, it is worth it.
If you don’t make a nomination your superannuation does not automatically form part of your estate
If no nomination is made, or a non-binding nomination is made, the fund can pay benefits to any of the following people:
- your spouse;
- your de-facto partner (who was living with you as at the date of your passing);
- your children;
- someone with whom you have an “interdependency relationship” with (which generally means people who live together and the relationship involves financial and domestic support); and
- the executor or administrator of your estate.
It is up to the fund to decide to whom the benefits go. It does not automatically form part of your estate to be distributed as outlined in your Will or under the laws of intestacy (which set out who gets your property if you die without a Will).
If a non-binding nomination has been made, it is highly likely that the fund will consider it but the law does not require the fund to follow it.
It is also important to note that the only people that can be nominated are those above. If someone else is nominated, the nomination is not valid.
Your superannuation death benefit includes your life insurance proceeds
Superannuation funds are required to arrange a life insurance policy for their members (with some exceptions). The above commentary about superannuation death benefits includes your life insurance proceeds so the amount may be significant. When a younger person sadly passes away, this is often the largest asset left. It should not be left to the fund to decide who receives it but this is the case if a binding nomination has not been made.
Considerations for blended families
Making a binding nomination is of particular importance to those in a blended family or who have re-partnered after having children as was the case in Lynn. Parents who would like their children to receive their superannuation death benefits can only ensure this by making a binding death benefit nomination.
The way to be certain where your superannuation benefits will go
The only way to be certain is to make a valid binding nomination which (as stated above) involves correctly completing a paper form, signing it in front of two witnesses and posting it to the fund.
