When there is a self-managed super fund

There are around 653,000 self-managed super funds in Australia holding about $1.05 trillion, with a median member age in the sixties. Somewhere between eight and twelve thousand members die each year. For those families, the fund is usually the largest asset and the most complicated one.

Three things make it harder than an ordinary super fund. The money does not pass under the will. The surviving trustee has legal duties from the moment of death. And the fund's own trust deed, not general super law, decides most of what happens next.

Week one: find the deed and call the accountant

The trust deed governs almost every decision that follows, so finding it comes before anything else. What to gather:

• The trust deed and every amendment. Funds are often decades old and amended several times. An amendment you have not found may be the one that matters.
• The most recent financial statements and the last annual return.
• Any death benefit nomination, and the pension documents if the member was drawing a pension.
• The corporate trustee's company details, if there is one.
• Contact details for the accountant, administrator and auditor.

Tell the fund's accountant or administrator immediately. They can lodge the ATO notification and will know the fund's history.

Until the trustee position is settled, do not sell fund assets, pay anyone, or change bank signatories.

Who is the trustee now?

A self-managed fund has to keep meeting the legal definition of an SMSF, and that definition ties trustees to members. When a member dies, the structure usually breaks.

The most common case: a two-member fund with individual trustees, typically a couple, where one has died. The survivor cannot be the sole individual trustee of a fund with one member.

The executor can step in

The deceased member's legal personal representative (the executor, or the administrator where there is no will) may act as trustee, or as a director of the corporate trustee, in the deceased member's place. That is expressly permitted, and it runs from the date of death until the death benefit starts being paid.

This is the usual bridge. It keeps the fund compliant while the family decides what to do, and it gives the executor a seat at the table when the death benefit decision is made. If the executor and the surviving trustee are different people with different interests, that is deliberate.

Six months to restructure

Where the fund would otherwise stop meeting the SMSF definition, the law gives it six months from that point before it does. Three options:

1. Appoint another individual trustee, commonly an adult child. Straightforward, but it gives that person legal duties and a say in the fund.
2. Move to a corporate trustee with the survivor as sole director. More paperwork now, simpler forever after, and it avoids repeating this exercise on the second death.
3. Wind the fund up and roll the balance into an ordinary super fund. Often the right answer for a surviving spouse who never wanted to run a fund.

Follow the appointment process the trust deed sets out, and talk to the fund's accountant before signing anything.

ATO: death of an SMSF member · ATO: appoint your SMSF trustees

Notify the ATO and ASIC within 28 days

A death changes the fund's trustees and members, and those changes must be reported to the ATO within 28 days. It can be done through the Australian Business Register, by a registered tax agent, or on the paper form "Change of details for superannuation entities" (NAT 3036).

If the fund has a corporate trustee, the director's death is a change of company officeholder and ASIC Form 484 must be lodged within 28 days. Late lodgement attracts a fee that rises the longer it is left.

ATO: notify us of changes to your SMSF · ASIC: add or remove a company officeholder

The binding nomination, and why the deed decides

This is the single most misunderstood point in Australian superannuation.

In industry and retail funds, a binding death benefit nomination generally lapses three years after it is signed, under a superannuation regulation. Most people, and a fair number of advisers, assume the same rule applies to self-managed funds.

It does not. In Hill v Zuda in 2022, the High Court held unanimously that the three-year lapsing regulation does not apply to self-managed super funds. In an SMSF, the trust deed governs: whether a nomination binds the trustee at all, how it must be signed and witnessed, and whether it lapses.

The question is what this deed requires, and whether this nomination meets it.

What to check, in order

1. Does a nomination exist? Look in the fund records, with the accountant, and with any solicitor who prepared the deed.
2. Does the deed allow binding nominations, and in what form? Some deeds require a specific form of words. Some allow non-lapsing nominations. Some are silent, which can mean a nomination does not bind the trustee at all.
3. Was it witnessed as the deed requires? Where a deed adopts the usual standard, it needs two adult witnesses, neither of them named in the nomination. A common and fatal error is the other member of the fund witnessing it.
4. Has it lapsed, if the deed says it can?
5. Does it name people who can legally receive the money? A benefit can only be paid to a spouse or de facto partner, a child of any age, someone in an interdependency relationship, someone who was financially dependent, or to the estate. Naming anyone else does not work, however clear the intention.

If there is no valid nomination

The surviving trustee decides who receives the benefit, guided by the trust deed and super law. In a first marriage with adult children who all get along, that is usually uncontroversial. In a blended family, or where the fund is large, it is the circumstance most likely to end in a Supreme Court dispute, with the grieving spouse as the defendant.

Get advice before deciding. Record the decision and the reasons in a trustee minute. If it is ever challenged, that minute is the document a court reads.

Reversionary pensions are different

Where the member was drawing a pension that was set up as reversionary, it continues automatically to the named person. No trustee decision is required and no nomination applies to it. Check the pension documents, because a fund can easily have a reversionary pension and a separate accumulation balance governed by a nomination.

Paying the death benefit

The law requires the benefit to be cashed as soon as practicable after the death. There is no fixed number of months. The ATO previously pointed to six months as a reference point and withdrew that guidance in 2025, so avoid treating six months as a rule. What matters is that the trustee acts promptly and records the reasons for any delay.

The form of payment

• A dependant can take a lump sum or an income stream.
• A non-dependant can only take a lump sum, in at most two payments.
• A lump sum to a spouse, a child under 18, or someone financially dependent is tax-free.
• A lump sum to a financially independent adult child is taxed on the taxable component.

Where a pension is involved the fund has transfer balance account reporting obligations, generally within 28 days after the end of the relevant quarter.

Assets can often be transferred out in kind rather than sold, if the deed allows. Property held inside a fund is the hardest asset to deal with and usually forces either a sale or an in-specie transfer, both of which take months.

Winding up, and why it takes longer than expected

Once the benefit is paid, the fund either continues for the surviving member or is wound up. Winding up means paying out or rolling over every balance, completing a final audit, and lodging a final annual return marked as final. Lodging that return is what tells the ATO the fund is closing; the ATO then reviews the audited accounts, settles any tax, and writes to confirm the fund's ABN has been cancelled.

The slow part is almost never the ATO. It is getting closing statements from every fund manager, platform and registry the fund invested with. A fund that invested directly with a dozen managers needs a dozen closing statements, and some take months to arrive. The audit cannot be completed without them and the final return cannot be lodged without the audit.

Two things help: ask every institution for a closing statement in the first month rather than the sixth, and set a weekly hour to chase the ones that have not answered.

ATO: winding up a self-managed super fund

When to get a specialist involved

Most of this can be done by the family with a good accountant. Get an SMSF lawyer involved when:

• The family is blended, or anyone has suggested they may contest the benefit.
• The trust deed is old, unclear, or amendments are missing.
• The nomination's validity is genuinely in doubt.
• The fund holds property, particularly with a limited recourse borrowing arrangement.
• The executor and the surviving trustee disagree.

An hour of specialist advice at the start costs a fraction of a dispute later, and the disputes in this area are expensive.