Quick question. If you died tomorrow, do you know who gets your super? Most people assume it goes with the will. It does not. Super does not form part of your estate, and unless you have the right nomination in place, a super fund trustee you have never met decides where it goes, and how long that takes. On the latest Wealthlab Podcast episode, Scott and Phil covered the three types of nominations, the paperwork traps that get forms rejected, and a tax rule that can hand adult children a bill of tens of thousands of dollars. Here is the full picture.
Why your will does not cover your super
Your will deals with assets you own personally: the house, bank accounts in your name, shares, crypto, the lot. Super is different because you do not technically own it. Your balance is held in trust for your benefit, and the trustee of your super fund, whether it is a large industry fund or a small one, must decide what happens to that money when you die.
The trustee may decide it should follow your estate. They may decide something else. Without a valid nomination, you lose certainty over where the money lands, and the process of the trustee identifying and weighing up potential claimants can take a very long time.
What happens when there is no valid nomination
The delays are not hypothetical. In November 2025, the Federal Court ordered the trustee of Cbus, one of Australia’s largest super funds, to pay a $23.5 million penalty over serious failures in processing death benefits and insurance claims. ASIC’s original case concerned more than 10,000 death and disability claims that were not handled in a timely way, and the court found that during one period, around half of all death claims had been open for more than a year (ASIC media release). As Scott noted on the episode, this is not about one fund. Similar service failures have been raised across the industry, which is exactly why leaving the outcome to trustee discretion is a risk.
The claims side can get messy too. Phil shared a story from someone he knows who worked in death benefit distribution at a large insurer: a $170,000 super balance with no binding nomination attracted 17 separate people trying to lay a claim on it. Working through 17 claimants takes a long time, and the family waits while it happens.
The three types of nominations
Non-binding nomination. Effectively a wish list. The trustee can consider it and override it. As Phil put it, it would not be his first choice, though there are situations where it has a role.
Binding nomination. Done properly, it forces the trustee to pay exactly who you nominate. No discretion, no weighing of claimants, and far narrower grounds for anyone to contest it. There is no “fairness test” like there is with wills.
Reversionary beneficiary. Available once you move to an account-based pension in retirement. You nominate someone, typically a spouse, and if you die, the pension simply keeps paying to them. The cash flow rolls on without interruption.
The binding nomination fine print
A few details trip people up constantly, and this is where Phil’s years of rejected forms come in handy.
Lapsing vs non-lapsing. Depending on the fund, a binding nomination either stays in place until you change it (non-lapsing) or expires, usually every 3 years (lapsing). Phil has seen plenty of people with an ex-partner from 20 years ago still listed as a valid binding nomination. Knowing which type your fund uses, and diarising the renewal if it lapses, matters.
Who you can nominate. Only a spouse, a dependant (such as a child), someone financially dependent on you, or someone in an interdependency relationship with you. A sibling, friend, niece or nephew generally cannot receive a binding nomination unless dependency can be established. If you want your super to go to someone outside that list, the cleaner route is a binding nomination to your legal personal representative, which directs the super into your estate to be dealt with under your will.
The paperwork is brutally strict. Many funds still require a wet signature, witnessed by two people over 18 who are not nominated, all signed on the same date. Phil has seen forms rejected because the witnesses used a different colour pen. He has seen the classic three-kids split of 33% each rejected because it only adds to 99%. Whole percentages, adding to exactly 100, everything dated consistently. One of the kids just has to get lucky with the extra 1%.
The tax trap: dependant does not always mean dependant
Here is the part that catches the most people. “Dependant” means different things under super law and tax law. An adult child can receive your super through a binding nomination (they are a dependant under super law), but as a non-dependant under tax law, they pay tax on the taxable component of the benefit: 17% including the Medicare levy, and for most people the taxable component is most of the balance (ATO, rules current as at September 2026).
Phil’s example from the episode: a $500,000 super balance that is all taxable component, left to an adult child, arrives with an $85,000 tax bill. The fund withholds it before the money is paid. Meanwhile, the same $500,000 sitting in a bank account would be inherited tax-free. Phil’s verdict: “They bang on about not having death taxes in Australia, but that’s a good sneaky one.”
Please note: All figures, projections and scenarios in this article are approximate and for illustrative purposes only. Individual outcomes will vary based on personal circumstances, investment returns, fees, and current government policy. This is general information, not personal advice.
A spouse, a child under 18, or someone genuinely financially dependent or interdependent generally receives the benefit tax-free. It is almost always adult children where the 17% bites, and if you are in your 50s or 60s expecting an inheritance from your parents, this applies to you as the recipient too. There are strategies that can reduce the exposure, including recontribution strategies, which we covered in more depth in our podcast episode on super, death and gifting. Whether any of them suit a particular situation depends on individual circumstances.
Blended families: where nominations earn their keep
Phil raised a question he loves asking couples in meetings: what happens to the super if one of you has kids from a previous relationship? “It usually creates a really awkward silence. Everyone looks at each other. We haven’t thought about that.”
A binding nomination can direct specific percentages to specific people, bypassing the estate entirely, which also means bypassing the risk of the will being contested. That makes it a genuinely useful tool for making sure a child from a previous marriage is looked after, or for balancing the estate when different beneficiaries are being handled through different channels.
Two cautions from the episode. First, if you use nominations as an estate equalisation tool, review them regularly, because super balances grow in accumulation and shrink in retirement, so the split drifts over time. Second, non-binding nominations offer little protection here. Phil recounted a story from an estate planner about a man whose non-binding nomination pointed to his children; a girlfriend of only a few months, who had been living in and out of his house, was able to establish dependency and claim a chunk of the money.
FAQ
Does super go through my will?
No. Super is held in trust and does not form part of your estate. The trustee of your super fund decides where it goes unless you have a valid binding nomination directing them, or you nominate your legal personal representative to pull the super into your estate.
What is the difference between a binding and non-binding nomination?
A valid binding nomination compels the trustee to pay the people you nominate. A non-binding nomination is guidance only, and the trustee can override it after considering all potential claimants.
Who can I name in a binding super nomination?
A spouse, a dependant such as a child, someone financially dependent on you, someone in an interdependency relationship with you, or your legal personal representative (your estate). Friends, siblings and other relatives generally cannot be nominated directly unless dependency is established.
Do adult children pay tax on inherited super?
Usually, yes. Adult children are typically non-dependants under tax law, so the taxable component of a super death benefit is taxed at 17% including the Medicare levy. The super fund withholds this before paying the benefit. Tax dependants, such as a spouse, generally receive the benefit tax-free.
How often should I update my binding nomination?
Lapsing binding nominations typically expire every 3 years and must be renewed. Non-lapsing nominations stay in place until changed, which makes reviewing them after major life events (marriage, separation, new children) essential. Many people still have decades-old nominations pointing to former partners.
Can a binding nomination be contested?
The grounds are much narrower than for a will: formal defects in the document, lack of capacity when it was signed, undue influence or fraud, or the nomination having lapsed. There is no fairness test, which is a key reason people use them for certainty.
Getting this sorted
Wills and estate structuring are solicitor territory, and a good estate planning solicitor is worth the money. Binding nominations sit squarely in the financial advice lane, and they interact with your super, pension structure and the tax outcomes for whoever inherits. If this episode has raised questions about how your own super is set up to pass on, have a chat with the Wealthlab team about how these general principles might apply to your circumstances. Book a free call, or read more about our retirement planning and superannuation services.
You can watch the full episode here:
