ATO issues reminder on making BDBN updates for SMSFs
The Australian Taxation Office (ATO) has reminded the need for SMSFs to keep their beneficiary nominations up to date to ensure they have full control over who will receive their superannuation following their death.
In a recent update, the ATO flagged the importance for advisers to remind clients to think about what they want to happen to their superannuation following their death.
“After death, an individual’s super balance and any insurance benefit is usually paid to their dependants or legal representative,” the ATO said.
“To ensure the individual has control over who receives their super following their death, it is essential that they advise their super fund by nominating their beneficiaries.”
There are two types of nominations when nominating a beneficiary, which include the non-binding nomination where the trustee of their super fund will decide who to pay their death benefit to, according to the ATO. The benefit will be paid at the discretion of the trustee to those considered to be financially dependent on the individual.
The binding nomination is where the trustee of their super fund is required, by superannuation law, to pay their benefit to the person(s) they have nominated when they die.
The ATO stressed the importance for practitioners to remind clients to take the time to ensure they have nominated a valid beneficiary through their super fund.
“If the individual has no eligible dependants or wishes to direct their death benefit to others that are not valid dependants, they can nominate their super to be paid to their personal legal representative to be included in the estate,” the ATO explained.
“If the individual does not make a nomination, then the fund trustee will have the discretion to pay the death benefit in accordance with the fund rules and legislation.
“Members of a self-managed super fund (SMSF) also need to nominate who will get their benefits. A binding death benefit nomination directs the SMSF trustee to pay the benefit to a legal personal representative or a dependant. Without a binding nomination, the remaining trustees will decide how the benefits are distributed by considering the trust deed and super laws.”