11.46 Many decision-making issues in relation to superannuation concern the operation and power of state and territory appointed decision-makers, including powers of attorney. As they arise under state and territory law, these issues go beyond the scope of this Inquiry. The focus of this chapter is confined to decision-making issues that may require amendment to Commonwealth legislation and legal frameworks.
11.47 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 governed by their trust deeds and governing rules.
11.48 This section discusses two specific questions with respect to superannuation and binding death benefit nominations. The first question is whether the SIS Act and SIS Regulations should be amended to provide for supported decision-making when a member of a superannuation fund nominates a beneficiary. The second question relates to 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.
Binding death benefit nominations
Question 11–3 Should the Superannuation Industry (Supervision) Act 1993 (Cth) and Superannuation Industry (Supervision) Regulations 1994 (Cth) be amended to provide:
(a) for supported decision-making regarding a binding death nomination of a beneficiary;
(b) that a state or territory decision-maker (such as under an enduring power of attorney) may nominate a beneficiary on behalf of the member?
Question 11–4 If a person acting under an enduring power of attorney may make a binding death nomination on behalf of a person holding a superannuation interest under the Superannuation Industry (Supervision) Act 1993 (Cth) and Superannuation Industry (Supervision) Regulations 1994 (Cth), should they be required to have regard to the will, preferences and rights of the member in making the nomination? What safeguards need to be in place?
11.49 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 notice nominating a beneficiary. 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.
11.50 ‘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’. The ALRC is interested in stakeholder feedback on whether amendment may be required to this definition.
11.51 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.
11.52 The Law Council of Australia submitted that
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.
11.53 Subject to the scope of the appointment of a state or territory decision-maker, such as a power of attorney, there does not appear to be any restriction in the SIS Act or SIS Regulations that would prevent a person acting under a power of attorney from completing and signing a binding death benefit nomination. The Superannuation Complaints Tribunal has held that an enduring power of attorney would have permitted such an action.
11.54 The Law Council of Australia has suggested that superannuation funds would adopt a more consistent approach if there were greater clarity in legislative provisions governing superannuation death benefits.
11.55 There appear to be key three issues. First, if persons with disability are being prevented from nominating a beneficiary because they require decision-making support, the SIS Act and SIS Regulations may need to be amended to remedy this situation. The ALRC is interested in stakeholder feedback in relation to this issue.
11.56 Secondly, should the SIS Act and SIS Regulationsbe amended to limit the provision of a binding death nomination to persons with disability who are able to make the decision, with support? For example, should a person acting for a person with disability, under an enduring power of attorney, be restricted from making a binding death nomination? While a nomination is a lifetime act, the effect is will-like in nature—as it affects property after the death of the person who holds the superannuation interest.
11.57 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 legislation also reflects the time of its introduction in the standard applied by the courts. For example, the courts have to ask 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’.
11.58 For the purposes of this Inquiry, the key question is whether a similar approach should be taken in relation to binding death nominations. This would require strict provisions for testing whether the nomination is one that the person would really want: that is, does it express their will and preferences? If it is considered that binding death nominations should only be made by the person whose superannuation interest is affected, with appropriate support in making that decision, then the SIS Act and SIS Regulations should be clarified to this effect.
11.59 Thirdly, if a person acting under an enduring power of attorney is to be permitted to make a binding death nomination for the person, then the SIS Act and SIS Regulations need, similarly, to be clarified. The standard by which such nomination should be made and the scrutiny made of the nomination by way of safeguards should also be made clear.
11.60 Accordingly, the ALRC asks whether legislative change is required to clarify whether a binding death nomination may be made by a person acting on behalf of another (such as by an enduring power of attorney), and, if so, what standard should be used to guide such action and what safeguards are necessary in relation to it.
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).
Ibid s 59(1A); Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 6.17A. There is also provision for a non-binding death benefit nomination which is not binding on the trustee of the superannuation fund, however 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. A dependant is defined to include the spouse, child or any person with whom the person has an interdependency relationship: ss 10, 10A.
Superannuation Industry (Supervision) Act 1993 (Cth) s 10.
Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 6.17A.
Law Council of Australia, Submission 83.
Superannuation Complaints Tribunal, Decision D07–08 30 (3 September, 2007) .
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].
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 65, [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 65, [6.11].