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Clarity from the High Court of Australia on SMSF Binding Death Benefit Nominations (BDBN) (at last)

The High Court has ruled that a binding death benefit nomination (BDBN) in a Self Managed Super Fund (SMSF) does not need to comply with Reg 6.17A of the SIS Regs – which provides, among other things, that a BDBN lapses after three years and requires two independent witnesses.

  • In this case, the deceased had inserted a BDBN clause in his SMSF trust deed which stated that if either member of the fund died, the trustee was to distribute the deceased member’s balance to the surviving member.
  • The deceased died more than three years after making the BDBN in favour of his de facto (the only other member of the fund).
  • The deceased’s daughter argued that the BDBN clause did not comply with the standards prescribed by reg 6.17A.

However, the High Court unanimously held that Reg 6.17A does not apply to SMSFs and therefore a BDBN for an SMSF can last indefinitely. (Hill v Zuda Pty Ltd [2022] HCA 21, 15 June 2022.)

Implications for clients with SMSF's

SMSF members should consider having their trust deed reviewed to ensure the SMSF deed provides for non-lapsing BDBNs, that the deed is updated if it has a BDBN provision that relies on reg 6.17A, and to ensure the deed is valid and reflects their wishes and circumstances.

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