Why SMSF Members and Advisers Must Review Their Binding Death Benefit Nominations

Superannuation, Wills and Estates

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DATE PUBLISHED: November 22, 2021

A recent decision has created short-term uncertainty for Self-Manged Super Funds (SMSFs), their members and advisers. This follows after the High Court granted leave to allow an appeal to proceed in the case of Hill v Zuda Pty Ltd as trustee for The Holly Superannuation Fund & Ors [2021] WASCA 59.

The superannuation legislation and regulations prescribe requirements for Binding Death Benefit Nominations (BDBNs). The regulations contain the mechanical arrangements relevant to BDBNs, which include requirements:

  • For the trustee to give members certain information prior to putting in place a BDBN; 
  • For the form of the BDBN and number of witnesses; and 
  • That the BDBN lapses every three years.

While it is possible to have non-lapsing nominations even under the superannuation legislation and regulations, additional requirements must be satisfied for these to be valid.

Though the current BDBN requirements apply for non-SMSFs, several recent cases appeared to confirm that the requirements did not apply to SMSFs. This has been the case for many years, however, the purpose of the recently announced appeal is to now consider whether SMSFs should have the same legislative requirements.

Until the outcome of the appeal is revealed, uncertainty prevails. For SMSFs that have not followed the form requirements in the current regulations, existing BDBNs may not be valid. This means that, even if validly made, those that purport to be non-lapsing may lapse after three years where they do not meet the additional requirements and that older BDBNs may have already lapsed.

Steps to consider

Until we receive the Court’s final decision, for certainty, advisers should consider:

  • Reviewing existing nominations to see that they comply with the requirements of the superannuation regulations. If they don’t, then members should put in place new nominations.
  • Notifying fund members whose BDBNs are older than three years to have them renew or confirm those nominations.
  • Ensuring that new BDBNs comply with the superannuation regulations.
  • If clients want to make non-lapsing nominations, ensure that the nominations will meet the superannuation legislation and regulation requirements. This may require a deed review and amendment.

If the High Court decides that the superannuation regulations requirements apply to SMSFs, it will be interesting to see if the government takes steps to change the regulations.

How Can We Help?

McInnes Wilson Lawyers' Superannuation and Wills and Estates team often come together to assist clients in matters such as these. By combining knowledge and experience across both areas of law, we can provide you with insightful and quality advice.

If you require our assistance, please fill out the enquiry form below or contact Neal Dallas, Victoria Mercer or Emily Ryan for an obligation-free appointment.

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