In the recent decision of Hill v Zuada [2022] HCA 21 the High Court of Australia considered the requirement for a binding death benefit nomination in relation to a self-managed superannuation fund (‘SMSF’).
The case involved a SMSF known as the ‘Holly Superannuation Fund’ which had two members and who’s trustee was Zuada Pty Ltd. The trust deed establishing the SMSF was amended in 2011 to include a binding death benefit nomination that stipulated in the event of the death of one member, the other member would receive the entirety of their balance.
Upon the death of one member, their child, a Ms Hill, brought an action arguing that the death benefit nomination did not comply with the relevant regulations of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SIS Act’), and so the benefit should instead be paid to her as the deceased member’s child.
The Court undertook a detailed review of the SIS Act and its accompanying regulations, specifically regulation 6.17A. This regulation requires all binding death benefit nominations for superannuation funds to be signed and witnessed and must be renewed every three years.
In a supportive move for self-managed super funds, the High Court found that the regulations of the SIS Act did not apply to SMSF’s, and the nomination made the member was valid. Accordingly, Ms Hill was not eligible to receive the benefit and the appeal was dismissed.
This decision highlights the flexibility of a SMSF in death benefit nominations, allowing for more flexible and longstanding nominations to be made. However, whilst the nomination need not comply with the SIS Act, it does need to comply with the trust deed of the SMSF. Accordingly, great care should still be taken when drafting a binding death benefit nomination. Further, it is still prudent to regularly review a death benefit nomination in case your situation changes.
If you would like to take advantage of the benefits of an SMSF or have your trust deed reviewed to ensure a binding death benefit nomination is compliant, contact the experienced team at the Law Office of Conrad Curry on (02) 4050 0330.