In the much anticipated decision of Hill v Zuda Pty Ltd, the High Court has determined that regulation 6.17A of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regs) does not apply to binding death benefit nominations (BDBNs) prepared for self managed superannuation funds (SMSFs).

In particular, the High Court stated that the reg 6.17A(4) obligation to provide notice of the BDBN to the super fund trustee did not apply to SMSFs. The High Court noted that such a requirement, in the context of an SMSF, where all members are also trustees/directors, is “at best an exercise of formality and at worst redundant”. As an aside, that comment is not always applicable as persons other than members can be trustees/directors in certain circumstances.

This decision is an important clarification from the High Court and supports decisions of the Queensland Supreme Court, the Full Court of South Australia and the Court of Appeal of Western Australia on this issue. It means that the trust deed of an SMSF will be the sole source of whether an SMSF can have BDBNs and how those BDBNs will operate. Importantly, this means that, unlike public offer super funds, SMSFs can have non-lapsing BDBNs.

It is therefore vital that any SMSF member that wishes to make a BDBN, reads the trust deed of the SMSF to determine if the member can make a BDBN, what formalities need to be complied with and whether the BDBNs will be lapsing.

Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au