Binding death benefit nominations, self-managed superannuation funds and the High Court decision in Hill v Zuda

Binding death benefit nominations, self-managed superannuation funds and the High Court decision in Hill v Zuda

15 June 2022 Authored by: Scott Hay-Bartlem   |   Topics: Professional advisers, Superannuation

On 15 June 2022, the High Court handed down its decision in Hill v Zuda Pty Ltd as trustee for The Holly Superannuation Fund [2022] HCA 21. The case concerns BDBNs in SMSFs and whether they need to comply with the technical requirements in the superannuation regulations.

The decision

The High Court decided that regulation 6.17A of the Superannuation Industry (Supervision) Regulations does not apply to BDBNs in SMSFs.

This means that requirements, like lapsing after three years and having two independent witnesses, do not apply to BDBNs in SMSFs, unless imposed by the trust deed.

The background

Zuda Pty Ltd was the trustee of the Holly Superannuation Fund, an SMSF. One of the members died, and his daughter challenged his BDBN on the basis that it did not comply with regulation 6.17A.

The West Australian courts followed earlier decisions in other states that found that BDBNs in SMSFs do not have to comply with regulation 6.17A, however noted they did not necessarily agree with that result.

The High Court granted special leave to appeal and ultimately decided that regulation 6.17A does not apply to BDBNs in SMSFs.

The consequences

The rules for making BDBNs in SMSFs are imposed by the SMSF trust deed, and the requirements in regulation 6.17A do not have to be complied with – unless imposed by the SMSF trust deed.

It is still vitally important to read and follow the SMSF trust deed precisely when it comes to making a BDBN to ensure it is valid and binds how the trustee deals with superannuation death benefits in an SMSF.

While the immediate challenge to BDBNs may have passed, there are still many risks with BDBNs, and they can still be challenged and go wrong in many ways. Now is a good time to review BDBNs for benefits in SMSFs.

Join our webinar on 23 June 2022 where we explore this further, or contact a member of our team.

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