11.50 Many decision-making issues in relation to superannuation concern the operation and powers of state and territory appointed decision-makers, including under powers of attorney. The focus of this chapter is confined to decision-making issues that may require amendment to Commonwealth legislation and legal frameworks.
11.51 The Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) and the Superannuation Industry (Supervision) Regulations 1994 (Cth) (SIS Regulations) govern the operation of superannuation funds in Australia. The Australian Securities and Investments Commission (ASIC), the Australian Prudential Regulation Authority (APRA) and the Commissioner of Taxation supervise superannuation funds. Individual superannuation funds are also administered by their trust deeds and in accordance with governing rules.
11.52 Superannuation is generally provided through a trust structure in which trustees hold the funds on behalf of members. The SIS Act and SIS Regulations provide mechanisms to allow superannuation fund rules to permit a member of the superannuation fund to complete a binding death benefit nomination of a beneficiary. The SIS Regulations require that the notice nominating a beneficiary must:
- be in writing;
- be signed and dated by the member in the presence of two witnesses, each of whom have turned 18 and neither of whom is mentioned in the nomination; and
- contain a declaration signed and dated by the witness stating that the notice was signed by the member.
11.53 A member can nominate a legal personal representative, or a dependant or dependants as their beneficiary. Nominations are generally only binding for three years, but can be renewed. On or after the member’s death, the trustee of the fund must then provide the member’s benefits to the person or people mentioned in the notice.
11.54 ‘Legal personal representative’ is defined under the SIS Act to mean ‘the executor of the will or administrator of the estate of a deceased person, the trustee of the estate of a person under a legal disability or a person who holds an enduring power of attorney granted by a person’.
11.55 One area of contention identified in the ALRC’s Discussion Paper was whether, when a member of a superannuation fund has appointed a state or territory decision-maker, that decision-maker should be able to nominate a beneficiary on behalf of the member.
11.56 As a matter of law, there does not appear to be any restriction in the SIS Act or SIS Regulations themselves that would prevent a person acting under a power of attorney from completing and signing a binding death benefit nomination. The issue arose for consideration by the Superannuation Complaints Tribunal in 2007. In Determination D07–0830, the sister of the member of the relevant superannuation fund (the Deceased Member) was also his legal personal representative. She also held an enduring power of attorney on behalf of the Deceased Member. Exercising the power of attorney, the sister had made a binding death benefit nomination on behalf of the Deceased Member as follows: 25% to herself and 37.5% each to the member’s daughter and son. The Trustee of the fund advised the sister that it had decided to accept the validity of the nomination and pay 37.5% each to the member’s daughter and son, and 25% to the sister as the legal personal representative. By his will, the Deceased Member left one quarter of his estate to his sister and the remaining three quarters to his son and daughter in equal shares. The sister lodged a complaint with the Tribunal that the decision of the trustee to pay 25% of the death benefit to her as the legal personal representative, and not directly to her, was unfair or unreasonable.
11.57 The Superannuation Complaints Tribunal stated that, in principle, the enduring power of attorney would have permitted the sister to complete and sign the binding death nomination, but the nomination would ‘only have been valid if the person nominated to receive the benefit was an individual who was either a dependant, or the Legal Personal Representative acting in that capacity, rather than as an individual’. The trustee decided that she was not a ‘dependant’ and therefore ineligible under the scheme, hence the only capacity in which she could receive a benefit was as the legal personal representative of her brother.
11.58 The Tribunal said that it was unclear on what basis the sister named herself in the nomination and the trustee should have clarified this ‘before accepting the nomination’. Further, the nomination was ambiguous because there were in fact two legal personal representatives appointed in the will. The Tribunal pointed to the power in the trust deed of the fund to refuse to accept or give effect to a binding nomination, if it is not sufficiently clear to allow the trustee to pay it according to the nomination.
11.59 The Tribunal decided that the trustee should not have accepted the nomination and that the trustee’s decision should be set aside. Instead, the Tribunal determined that 100% of the death benefit should be distributed to the Deceased Member’s estate. As the Tribunal did not decide the matter on the basis of the binding nomination, its comments are not of direct application.
11.60 As a matter of current practice the Law Council of Australia (Law Council) pointed to the different practices of funds:
some funds accept nomination by a person holding an enduring power of attorney granted by the member, generally without inquiring as to the wishes of the member. Some funds do not accept a nomination by a person holding an enduring power of attorney, with the result that binding nominations cannot be made by these members.
11.61 The Law Council suggested that superannuation funds would adopt a more consistent approach if there was greater clarity in legislative provisions governing superannuation death benefits.
11.62 This policy issue is a difficult one, given the difference between a nomination, as a lifetime act, and its effect, which is will-like in nature—as it affects property after the death of the person who holds the superannuation interest. In this context, in the Discussion Paper, the ALRC asked whether a person holding authority under an instrument such as an enduring power of attorney should be restricted from nominating a beneficiary on behalf of the person for whom they were acting—assuming that such action was not prevented by the power of attorney itself.
11.63 The Law Council agreed that the main issue around binding death benefit nominations is that there is currently no clear policy position on whether a nomination should be considered similar to a will or simply an instruction in relation to a person’s assets. The Council also agreed with the ALRC’s analysis that nominations are will-like in nature and they should be treated in policy terms ‘similarly to wills’.
11.64 Until recently, a will could only be made by the testator themselves, and not, for example, an enduring guardian. Under strict conditions, wills can now be authorised by the court in some jurisdictions (‘statutory wills’), where a person is regarded as having lost, or never having had, legal capacity. In the succession context it is a relatively new jurisdiction and exercised cautiously, given the importance accorded to testamentary freedom as a valued property right. Generally speaking, the conditions for such statutory wills reflect the changes in emphasis in approaches to legal capacity and support for those who may require decision-making assistance, discussed in Chapter 2. The standard to be applied by the courts reflects the time the relevant state or territory legislation was introduced. For example, the courts have to ask variously whether the proposed will would ‘accurately reflect the testator’s likely intentions’; is a will that is ‘reasonably likely’ to be one that the testator would have made; ‘is or may be a will … that the person would make’; or ‘is one which could be made by the person’.
11.65 While a limitation on the power of an enduring guardian is a matter that goes beyond the Terms of Reference for the Inquiry, the ALRC concludes that, as a policy matter, the role of an enduring guardian is one focused on the lifetime needs of the person. It is not appropriate for an enduring guardian to make a binding death benefit nomination, which is like a will in effect. The Law Council submitted that the SIS Act and SIS Regulations could be amended to make this clear so that a nomination ‘generally cannot be made on behalf of a member by a person exercising powers under an EPA’.
The SIS Act makes provision for the prudent management of certain superannuation funds and applies to all private sector funds and certain public sector funds that have elected to be regulated by the SIS Act: Superannuation Industry (Supervision) Act 1993 (Cth) s 3(1).
Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 6.17A. There is also provision for a non-binding death benefit nomination: although not binding on the trustee of the superannuation fund, the trustee will take the member’s wishes into consideration when making a decision as to whom to pay the benefit: Ibid reg 6.22.
Superannuation law restricts who is an eligible dependant to receive a death benefit payment to a spouse (including same-sex and de facto), child, or person with whom the member has an interdependency relationship: Superannuation Industry (Supervision) Act 1993 (Cth) ss 10, 10A.
Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 6.17A(7). When a binding nomination lapses there is some confusion about whether the death benefit becomes part of the estate or the nomination just becomes non-binding. Although it is outside the terms of reference this has been raised as an issue of concern.
This is subject to a trustee of the entity complying with any conditions contained in the regulations, and the member’s notice being given in accordance with the regulations. See Superannuation Industry (Supervision) Act 1993 (Cth) s 59; Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 6.17A.
Superannuation Industry (Supervision) Act 1993 (Cth) s 10(1).
Australian Law Reform Commission, Equality, Capacity and Disability in Commonwealth Laws, Discussion Paper No 81 (2014) Questions 11–1, 11–2.
Determination No D07-0830 (Unreported, Superannuation Complaints Tribunal, 3 September 2007) .
Ibid . Other issues were argued by the son and daughter, including that to exercise the power of attorney in favour of herself was a breach of fiduciary duty by the sister: .
Law Council of Australia, Submission 83.
See, eg, Rosalind Croucher and Prue Vines, Succession: Families, Property and Death (LexisNexis Butterworths, 4th ed, 2013) [3.10]–[3.12].
Australian Law Reform Commission, Equality, Capacity and Disability in Commonwealth Laws, Discussion Paper No 81 (2014) Question 11–3.
Law Council of Australia, Submission 142.
Succession Act 2006 (NSW) ss 18–26; Succession Act 1981 (Qld); ss 21–28; Wills Act 1936 (SA) s 7; Wills Act 2008 (Tas) ss 21–28; Wills Act 1997 (Vic) ss 21–30; Wills Act 1970 (WA) s 40; Wills Act 1968 (ACT) ss 16A–16I; Wills Act 2000 (NT) ss 19–26.
See the discussion in Croucher and Vines, above n 82, [6.11]–[6.20]; R Croucher, ‘“An Interventionist, Paternalistic Jurisdiction”? The Place of Statutory Wills in Australian Succession Law’ (2009) 32 University of New South Wales Law Journal 674.
Croucher and Vines, above n 82, [6.11].
Law Council of Australia, Submission 142. The Law Council’s submission was supported by National Mental Health Consumer & Carer Forum, Submission 100.