What the rise in SMSFs means for estate planning and dispute resolution
6 mins reading time
Recent debate about the role of superannuation as a “national asset” has coincided with a continued increase in Australians establishing self-managed super funds (SMSFs). While many people are attracted by the greater control an SMSF can provide, the estate planning and dispute resolution risks are often overlooked. Before making the move, trustees should understand both the opportunities and the potential pitfalls.
What could policy changes mean for super fund trustees?
At the heart of superannuation law sits section 62 of the SIS Act: the sole purpose test. A superannuation fund trustee must ensure that the fund is maintained solely for the purpose of providing retirement benefits to its members, or to their dependants in the event of death.
For APRA-regulated funds, section 52(2)(c) of the SIS Act expressly requires that trustees perform their duties and exercise their powers in the best financial interests of beneficiaries. Investment decisions must be directed toward maximising risk-adjusted returns for members—not toward achieving broader social, political or infrastructure objectives unless doing so also satisfies that duty.
The Prime Minister’s recent remarks about superannuation’s potential role as a “national asset” have reignited debate about how retirement savings should be invested in the role superannuation funds may play in supporting broader economic priorities.
The superannuation sector was quick to emphasise that trustees remain subject to strict legal obligations to act in members’ best financial interests.
Accommodating mandated investment directions would almost certainly require legislative amendment. The sole purpose test in section 62, the best financial interests covenant in section 52, and the investment governance framework in section 52(6) would each need to be modified or overridden to accommodate mandated investment directions. Such amendments would represent a significant shift in the legislative framework underpinning Australia’s superannuation system.
Against this backdrop, Australians continue to establish SMSFs in record numbers as they seek greater control over investment and estate planning decisions.
Why more Australians are establishing SMSFs
Changes to superannuation policy can have a significant impact on member behaviour and investment decisions. The proposed Division 296 tax on unrealised gains for superannuation balances exceeding $3 million (a measure that would tax gains members have not yet received) has already coincided with a surge in new SMSF establishments that is now a matter of record.
According to the Vanguard Investment Trends 2026 SMSF Investor Report, 48,500 new SMSFs were established in the 12 months to December 2025—the highest annual level of new fund creation since records began. The total SMSF population now stands at approximately 664,000 funds.
The face of the sector is also changing: new trustees are younger, with the average decision-making trustee aged 44, and funds are increasingly being established with lower balances than in previous years.
Historically, significant regulatory changes have often been accompanied by increased interest in SMSFs as some Australians seek greater control over their retirement savings and investment decisions. Any future reforms affecting investment decision-making may further influence demand for SMSFs. Nearly 40% of newly established SMSFs in 2025 reported using AI-based tools to assess whether an SMSF was right for them—a sign that technology is lowering the barriers to entry and enabling more Australians to make the switch with less reliance on traditional professional advice than ever before.
But from an estate planning perspective, the grass is not always greener.
What estate planning advantages can SMSFs offer?
The principal estate planning advantage of an SMSF is flexibility around binding death benefit nominations. In APRA-regulated retail and industry funds, a binding death benefit nomination must comply with regulation 6.17A of the SIS Regulations and traditionally lapses every three years if not renewed. If a nomination is not renewed, the trustee of the fund decides who receives your superannuation death benefit. It should be acknowledged that some APRA-regulated funds now offer non-lapsing binding nominations within their trust deeds. However, not all funds do, and members must check whether their particular fund permits this—many remain subject to the default three-year lapsing rule.
By contrast, the High Court confirmed in Hill v Zuda Pty Ltd [2022] HCA 21 that these lapsing requirements do not apply to SMSFs. A member can make a permanent, non-lapsing binding nomination that endures until revoked. For estate planning certainty, this is a powerful tool.
SMSFs also permit reversionary pension nominations that pass directly to a surviving spouse on death, avoiding the interim taxable period that can arise when a pension reverts to the accumulation phase while a trustee deliberates over distribution.
What estate planning risks should SMSF trustees consider?
SMSFs carry significant estate planning risks that are often underappreciated until it is too late.
Trustee succession
Trustee succession is the most common trap. When the sole or last surviving member of an SMSF dies, someone must step into the trustee role to administer the death benefit. If succession planning is inadequate, the result can be significant family disputes. In Re Marsella; Marsella v Wareham (No 2) [2019] VSC 65, an adult stepdaughter appointed herself and her husband as trustees following her mother’s death, then resolved to pay the entire $450,000 death benefit to herself—without giving genuine consideration to the deceased’s husband of 32 years. The Supreme Court of Victoria removed the trustees and ordered repayment.
Lapsed or defective nominations
Lapsed or defective nominations remain a risk where older trust deeds impose their own three-year lapsing requirements, or where nominations are made in favour of ineligible beneficiaries.
Incapacity planning
Incapacity presents another challenge. If a member loses capacity, a financial enduring power of attorney holder must be formally appointed as trustee or director—not merely permitted to act as agent—requiring careful coordination between the SMSF deed, the power of attorney instrument and the SIS Act.
How are SMSF death benefit disputes resolved?
Perhaps the most underappreciated difference lies in how disputes are resolved. Members of APRA-regulated funds can lodge complaints about trustee death benefit determinations with the Australian Financial Complaints Authority. While this provides a relatively low-cost avenue of redress, AFCA’s superannuation complaints division is notoriously slow, with disputes routinely taking years to be heard and determined.
SMSF members have no access to AFCA at all. Disputes about SMSF death benefits must be litigated in the relevant state Supreme Court by way of an originating application, statement of claim or judicial advice proceedings. The legal costs are substantial—often tens of thousands of dollars before a matter even reaches a hearing—and the emotional toll on grieving families is immense. There is a legitimate question as to whether a dedicated SMSF disputes list, akin to the specialist lists that exist for probate or equity matters, might be warranted as the sector grows.
What should SMSF trustees do next?
The impulse to move superannuation into an SMSF for greater control is understandable. But control comes with responsibility, complexity and legal exposure. Before moving from a retail or industry fund to an SMSF, Australians should obtain specialist financial and estate planning advice to ensure their SMSF is properly structured—with current nominations, adequate succession planning and a clear understanding of the dispute resolution landscape they are entering.
Macpherson Kelley’s Wills and Estates team can assist with SMSF succession planning and dispute prevention strategies. Get in touch with our team today for tailored advice.
The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.
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What the rise in SMSFs means for estate planning and dispute resolution
Recent debate about the role of superannuation as a “national asset” has coincided with a continued increase in Australians establishing self-managed super funds (SMSFs). While many people are attracted by the greater control an SMSF can provide, the estate planning and dispute resolution risks are often overlooked. Before making the move, trustees should understand both the opportunities and the potential pitfalls.
What could policy changes mean for super fund trustees?
At the heart of superannuation law sits section 62 of the SIS Act: the sole purpose test. A superannuation fund trustee must ensure that the fund is maintained solely for the purpose of providing retirement benefits to its members, or to their dependants in the event of death.
For APRA-regulated funds, section 52(2)(c) of the SIS Act expressly requires that trustees perform their duties and exercise their powers in the best financial interests of beneficiaries. Investment decisions must be directed toward maximising risk-adjusted returns for members—not toward achieving broader social, political or infrastructure objectives unless doing so also satisfies that duty.
The Prime Minister’s recent remarks about superannuation’s potential role as a “national asset” have reignited debate about how retirement savings should be invested in the role superannuation funds may play in supporting broader economic priorities.
The superannuation sector was quick to emphasise that trustees remain subject to strict legal obligations to act in members’ best financial interests.
Accommodating mandated investment directions would almost certainly require legislative amendment. The sole purpose test in section 62, the best financial interests covenant in section 52, and the investment governance framework in section 52(6) would each need to be modified or overridden to accommodate mandated investment directions. Such amendments would represent a significant shift in the legislative framework underpinning Australia’s superannuation system.
Against this backdrop, Australians continue to establish SMSFs in record numbers as they seek greater control over investment and estate planning decisions.
Why more Australians are establishing SMSFs
Changes to superannuation policy can have a significant impact on member behaviour and investment decisions. The proposed Division 296 tax on unrealised gains for superannuation balances exceeding $3 million (a measure that would tax gains members have not yet received) has already coincided with a surge in new SMSF establishments that is now a matter of record.
According to the Vanguard Investment Trends 2026 SMSF Investor Report, 48,500 new SMSFs were established in the 12 months to December 2025—the highest annual level of new fund creation since records began. The total SMSF population now stands at approximately 664,000 funds.
The face of the sector is also changing: new trustees are younger, with the average decision-making trustee aged 44, and funds are increasingly being established with lower balances than in previous years.
Historically, significant regulatory changes have often been accompanied by increased interest in SMSFs as some Australians seek greater control over their retirement savings and investment decisions. Any future reforms affecting investment decision-making may further influence demand for SMSFs. Nearly 40% of newly established SMSFs in 2025 reported using AI-based tools to assess whether an SMSF was right for them—a sign that technology is lowering the barriers to entry and enabling more Australians to make the switch with less reliance on traditional professional advice than ever before.
But from an estate planning perspective, the grass is not always greener.
What estate planning advantages can SMSFs offer?
The principal estate planning advantage of an SMSF is flexibility around binding death benefit nominations. In APRA-regulated retail and industry funds, a binding death benefit nomination must comply with regulation 6.17A of the SIS Regulations and traditionally lapses every three years if not renewed. If a nomination is not renewed, the trustee of the fund decides who receives your superannuation death benefit. It should be acknowledged that some APRA-regulated funds now offer non-lapsing binding nominations within their trust deeds. However, not all funds do, and members must check whether their particular fund permits this—many remain subject to the default three-year lapsing rule.
By contrast, the High Court confirmed in Hill v Zuda Pty Ltd [2022] HCA 21 that these lapsing requirements do not apply to SMSFs. A member can make a permanent, non-lapsing binding nomination that endures until revoked. For estate planning certainty, this is a powerful tool.
SMSFs also permit reversionary pension nominations that pass directly to a surviving spouse on death, avoiding the interim taxable period that can arise when a pension reverts to the accumulation phase while a trustee deliberates over distribution.
What estate planning risks should SMSF trustees consider?
SMSFs carry significant estate planning risks that are often underappreciated until it is too late.
Trustee succession
Trustee succession is the most common trap. When the sole or last surviving member of an SMSF dies, someone must step into the trustee role to administer the death benefit. If succession planning is inadequate, the result can be significant family disputes. In Re Marsella; Marsella v Wareham (No 2) [2019] VSC 65, an adult stepdaughter appointed herself and her husband as trustees following her mother’s death, then resolved to pay the entire $450,000 death benefit to herself—without giving genuine consideration to the deceased’s husband of 32 years. The Supreme Court of Victoria removed the trustees and ordered repayment.
Lapsed or defective nominations
Lapsed or defective nominations remain a risk where older trust deeds impose their own three-year lapsing requirements, or where nominations are made in favour of ineligible beneficiaries.
Incapacity planning
Incapacity presents another challenge. If a member loses capacity, a financial enduring power of attorney holder must be formally appointed as trustee or director—not merely permitted to act as agent—requiring careful coordination between the SMSF deed, the power of attorney instrument and the SIS Act.
How are SMSF death benefit disputes resolved?
Perhaps the most underappreciated difference lies in how disputes are resolved. Members of APRA-regulated funds can lodge complaints about trustee death benefit determinations with the Australian Financial Complaints Authority. While this provides a relatively low-cost avenue of redress, AFCA’s superannuation complaints division is notoriously slow, with disputes routinely taking years to be heard and determined.
SMSF members have no access to AFCA at all. Disputes about SMSF death benefits must be litigated in the relevant state Supreme Court by way of an originating application, statement of claim or judicial advice proceedings. The legal costs are substantial—often tens of thousands of dollars before a matter even reaches a hearing—and the emotional toll on grieving families is immense. There is a legitimate question as to whether a dedicated SMSF disputes list, akin to the specialist lists that exist for probate or equity matters, might be warranted as the sector grows.
What should SMSF trustees do next?
The impulse to move superannuation into an SMSF for greater control is understandable. But control comes with responsibility, complexity and legal exposure. Before moving from a retail or industry fund to an SMSF, Australians should obtain specialist financial and estate planning advice to ensure their SMSF is properly structured—with current nominations, adequate succession planning and a clear understanding of the dispute resolution landscape they are entering.
Macpherson Kelley’s Wills and Estates team can assist with SMSF succession planning and dispute prevention strategies. Get in touch with our team today for tailored advice.