On 15 June 2022, the High Court unanimously dismissed an appeal from the recent WA Supreme Court of Appeal decision in Hill v Zuda Pty Ltd 2021 WASCA 59. The High Court granted special leave to appeal and confirmed the prevailing view that regulation 6.17A of the Superannuation Industry (Supervision) Regulations (SIS Regs) does not apply to binding death benefit nominations (BDBNs) in SMSFs, meaning that requirements, like lapsing after three years and having two independent witnesses, do not apply unless imposed by the trust deed or the BDBN itself states that it lapses after a specific time.
The article outlines the case and what it means for Cleardocs BDBNs.Renay Sumercan, Maddocks
The WA Supreme Court of Appeal initially dismissed the proceeding on the basis that regulation 6.17A did not apply to the Fund as an SMSF by adopting a construction of regulation 6.17A that it was bound to follow the “seriously considered dicta” of an appellate court unless convinced that the other courts reasoning was “plainly wrong”.
On appeal, the High Court held that regulation 6.17A, properly construed, did not apply to an SMSF. The High Court concluded that this construction was consistent with the extrinsic materials and the purposes of the regulation.
The ATO’s SMSF Determination SMSFD 2008/3 states that, because:
subsection 59(1A) has no application to SMSFs and consequently the requirements prescribed in regulation 6.17A of the SISR for the making of binding death benefit nominations do not apply to SMSFs.
The rules for making BDBNs in SMSFs are imposed by the SMSF trust deed and therefore the requirements in regulation 6.17A do not have to be complied with, unless imposed by the SMSF trust deed. In practice, the decision confirms that BDBNs in SMSFs can remain binding for more than three years, subject to the terms of the SMSFs governing deed.
Importantly, BDBNs for SMSFs do not need to be renewed to remain binding (cf. reg 6.17A(7)) and so a non-lapsing and binding nomination can be made if it is done properly, being in accordance with the governing rules of the SMSF’s deed.
This decision serves as a reminder to review existing BDBNs and SMSF deeds to ensure that they provide for Non-Lapsing BDBNs and to ensure, including when creating new BDBNs, that they are valid, bind how the trustee deals with superannuation death benefits in an SMSF and accurately reflect an individual’s circumstances.
The Cleardocs BDBN has been drafted so that it expires after 3 years. However, if you have a Cleardocs SMSF deed you can also choose to purchase a Death Benefit Agreement from Cleardocs. This document achieves the same result as a BDBN but does not lapse after 3 years and remains in force and binding unless and until the member revokes it or replaces it. If you do not have a Cleardocs SMSF deed, then you can purchase the Update to SMSF product to change your existing deed to a Cleardocs deed and then purchase the Death Benefit Agreement product.
 Hill v Zuda Pty Ltd as Trustee for the Holly Superannuation Fund & Ors  HCA 21
 SMSFD 2008/3 at .
 Ibid at .
 Ibid at .
 Ibid at .
For more information, contact Maddocks on 03 9258 3555 and ask to a member of the Commercial Practice Group.
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