A series of SMSF-related court cases has demonstrated binding death benefit nomination (BDBN) provisions within the Superannuation Industry (Supervision) (SIS) Act and Regulations are unreliable and SMSF trustees should avoid using them, an SMSF legal expert has claimed.
DBA Lawyers director Dan Butler said during a webinar late last week: “We do not as a firm [recommend], and we do not encourage this, that you rely on a BDBN that is reliant on the SIS BDBN provisions, because you are skating on thin ice.
“We knock down so many BDBNs and often it is because they are on a deed which either expressly, or implicitly, brings in those SIS provisions, and they are not well written.
“The Supreme Court in a number of very important cases has said the SIS BDBN provisions are uncertain, ambiguous and should be recast by the commonwealth. They are very stern words which more or less say the commonwealth stuffed this up.”
In material handed out for the webinar and referenced by Butler, DBA stated the cases of Munro v Munro (2015), Cantor Management Services v Booth (2017) and Re Narumon Pty Ltd (2018) showed a BDBN for an SMSF was dependent on the trust deed rather than the SIS Act and SIS Regulations BDBN provisions.
“However, many SMSF deeds either expressly or implicitly include the SIS Act/SIS Regulations BDBN provisions, including via the general compliance with super standards or similar deeming of relevant SIS Act/SIS Regulations into the deed,” the firm stated.
“Thus, express ousting of SIS Act/SIS Regulations provisions is best practice to ensure an SMSF deed can support a binding and effective BDBN.”
Butler also pointed out the regulations lag behind legal rulings and technology in that they require BDBNs to be in writing and signed and dated by the member in the presence of witnesses who in turn had to make a signed declaration the BDBN was signed in their presence.
“This does not lend itself to technology and these other rules you need to satisfy mean it is not a good position to be in if they want to get a BDBN,” he said, referring to people being unable to witness documents due to COVID-19 restrictions.
