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Under the Superannuation (Industry Supervision) Act1993 (Cth) (SIS Act), SMSFs are required to be operated purely by their members; either as individual trustees or as directors of a trustee company.  When a member no longer holds capacity, they can no longer act as a trustee of the fund. So if the member’s benefits are to remain in the SMSF, someone must take over the trustee role.

The SIS Act allows for an attorney to step into the role of trustee for the incapacitated member but it is not as easy as simply swapping one for another. Some forward thinking is required by the member before incapacity strikes.

Firstly, the trust deed of the SMSF must expressly allow for its members to appoint a power of attorney in the place of the member. Without this express power, the appointment cannot be made.

Secondly, if the trustee of the SMSF is a company, the company’s constitution must allow for an attorney to be appointed in place of the director. If not, the constitution will need to be amended.

Thirdly, the member must have in place a valid enduring power of attorney. Because an attorney can only be appointed by someone with capacity, it is necessary that an enduring power of attorney document is executed by a member before the incapacitating event occurs.


When a member of an SMSF passes away, their member account comes to an end. As the member will no longer be contributing or using their account, the superannuation benefits must be distributed.

Two documents will affect the allocation of your superannuation. The first is your death benefit nomination.  This nomination tells the remaining trustees of the fund where you want your superannuation to go. This could be to your children, your spouse or other dependent.

The second document is your Will. Although you cannot allocate your superannuation by a Will directly, you can arrange for your death benefit nomination to distribute your superannuation to your estate.  This allows you to distribute your benefits to persons otherwise excluded under the SIS Act, such as your parents, siblings, cousins or nieces and nephews.

To ensure the outcome you want, you need to put a few things in place.

  1. Binding Death Benefit Nomination – if you want to be certain the trustees of the SMSF will do what you want them to do, your nomination must be binding, otherwise the trustees can distribute the benefits as they wish (subject to certain restrictions).Importantly, your nomination must follow the rules of the SIS Act and the SMSF trust deed. If it does not, the nomination may be found void allowing the remaining trustees to allocate your benefits however they wish, including to themselves if they are eligible under the SIS Act.
  2. Reversionary Pension – If you have a pension currently on foot which has appointed a reversionary beneficiary, you will need to consider how this interacts with your death benefit nomination.
  3. Will – Once your superannuation benefits are transferred to your estate, you will need to consider how you want the benefits to be distributed.

A sudden misadventure can quickly complicate your superannuation affairs, but with some forward planning many of these issues can be avoided. To achieve the best possible defence against incapacity and death benefit distribution issues, it is best to address all these as part of your larger estate plan.