Sorry for the “click bait” but if you have a self-managed super fund (“SMSF”), you might want to read on….
I’m sure you were all eagerly awaiting the High Court’s decision in Hill v. Zuda Pty Ltd [2022] HCA 21.
Let’s face it, it’s not every day the High Court hands down a decision on superannuation.
Clients often don’t have their Binding Death Benefit Nominations (“BDBN”), dictating where their superannuation benefits are paid on their death, up to date.
This can trigger costly litigation.
Up until the High Court’s decision in June, there was uncertainty about whether some specific regulations applied to a SMSF.
The outcome of the High Court’s decision would dictate if a deceased member’s superannuation would pass to his:
(a) defacto spouse (under the fund’s governing rules); or
(b) daughter (to an earlier marriage) through the deceased’s Will.
The daughter argued that a BDBN made by her father in favour of his defacto wife was invalid -as it didn’t comply with certain regulations.
The defacto argued those regulations didn’t apply.
The High Court agreed with the defacto.
Broadly, the High Court ruled, so long as the BDBN in a SMSF complies with the governing rules of the fund, then a member can in fact have a BDBN which is more flexible than what is set out in the legislation.
If a SMSF’s governing rules allow, it can avoid some requirements that apply to Retail and Industry Funds.
For example, it can have a BDBN that won’t expire after three years and does not need to be witnessed by two people.
Generally, as long as the form of the BDBN follows what is required in the fund’s governing rules, it will be valid.
Even if the three-year ‘life’ of a BDBN can be ignored in some circumstances, it is obviously important to regularly review your affairs to make sure your intentions are carried out.