The following article contains mentions of domestic violence and suicide. If it raises issues for you, please contact 1800 RESPECT (1800 737 732) to talk to a counsellor from the national sexual assault and domestic violence hotline or Lifeline on 131114.

The Albanese government is scoping out legislative options to stop domestic violence abusers from gaining control of their victims’ superannuation via death benefits, which could add further strain to a benefit payout process which is already under stress.

The consultation, released by the Treasury on Thursday, seeks industry feedback on three legislative pathways for how perpetrators of family and domestic violence can be prevented from claiming the death benefits of their victims. It came after superannuation groups lobbied for government action last year.

The first pathway proposed by the Treasury consultation, “board trustee discretion”, will essentially give super trustees the power to override or void a binding death benefit nomination in circumstances where it “reasonably” believes a deceased member’s beneficiary has perpetrated family and domestic violence against them.

This would give trustees a great amount of discretion and room to consider materials including police reports, evidence from doctors or psychologists, and history of accessing domestic violence-related payments.

However, the need to delicately deal with complex cases like these, which take time to investigate, will go head-to-head with the pressure on funds to pay out death benefits swiftly – funds including Cbus have been fined tens of millions of dollars for slow payments of benefits.

“There’s an implicit, if not explicit, encouragement from ASIC for trustees to look at the facts of particular death benefit claims and form a view on whether it looks like a controversial or uncontroversial one, to make a risk-based judgment and to quickly disburse the funds,” Luke Barrett, partner and head of superannuation at Gilbert + Tobin, told Investment Magazine.

“Given the focus on the best financial interest duty and the litigation around ‘efficiently, honestly and fairly’, you’d be forgiven for thinking it was mixed messaging from the regulator that there’s this heightened focus on service standards… but also the encouragement to not delay things in the pursuit of perfection and to favour quick disbursement of death benefits.”

One of the complexities most likely to occur on this pathway is that trustees may receive conflicting statements from various potential beneficiaries of a deceased member, especially when there’s a large death benefit at stake, Barrett said.

But at the other end of the spectrum, situations where there is no binding nomination are equally tough for trustees to address.

“While it’s not specifically said, perhaps what the Treasury was thinking was if there’s no binding nomination, the trustee has a discretion [in death benefits] anyway, so they could just choose to give the death benefit to someone that isn’t the abuser,” Barrett said.

“But the tricky thing is what happens if the abuser is the only eligible recipient?

“The unintended consequence that needs to be avoided is where this becomes a loophole for people to unravel binding nominations, in order to agitate disputes over death benefits after people are no longer with us.”

The second pathway proposed in the Treasury consultation, the “prescribed approach”, would see the SIS Act modified to allow trustees to override a beneficiary or a death benefit nomination, where there are court findings that the beneficiary has committed domestic violence against the deceased member.

This could be at the trustee’s discretion or mandating that a trustee exercise this power if a prescribed court finding exists. 

The third pathway proposed, “referral to deceased estate or a court”, will allow trustees to redirect death benefits to the estate or to a court where domestic violence is reasonably suspected, and distribute later following a judicial decision.

“I suspect that quite a few funds would prefer the clarity of just doing whatever a court has decided, or if it was a binary outcome, where if there’s been a conviction for abuse, then that person’s disentitled,” Barrett said.

The concern here is that it’s likely to “increase the cost and duration of disputes for the families of deceased victim-survivors, as well as exposing them to more complex and formal judicial processes and the associated risks of retraumatisation,” as outlined in the consultation.

With that said, Barrett said the reform is “positive” and trustees can perhaps consider steps to spot signs that a member is suffering from domestic violence early. For example, during the collection of a binding nomination, which is verified from time to time, funds can engage with members and see if they are in vulnerable situations.

The consultation is open until 15 April.

Editor’s note: This article has been amended to remove details relating to the death of Molly Wilkes.