A technical specialist has suggested a standard that applies to other sectors of the superannuation industry could be adopted to ensure trustees and members know exactly what the status of any death benefit nomination is at any point in time.
“One of the good things that could be a indicator for this is including something on member statements that indicates what the current valid nomination is,” SuperConcepts SMSF technical and strategic solutions executive manager Philip La Greca told delegates at SMSF Professionals Day 2022 hosted by selfmanagedsuper in Sydney yesterday.
“Technically it’s not something SMSFs have to do, but it is a good thing to do. It’s something APRA (Australian Prudential Regulation Authority) funds have to do.
“If you’ve got that statement saying there is nobody specified [to receive a death benefit], then at least it could trigger [acknowledgement for the need of a review].”
La Greca made the suggestion in light of the current situation SMSFs are experiencing with regard to binding death benefit nominations (BDBN).
He pointed to the Hill v Zuda case currently being heard in the High Court of Australia, which will determine whether BDBNs automatically lapse after a period of three years as specified in the Superannuation Industry (Supervision) (SIS) Regulations.
“That will have some major ramifications because it could in fact mean the only valid type of binding nomination [an SMSF can have] will be those that meet the SIS requirements,” he noted.
“Of course, if that’s the case, there is going to be a need for a major review of all the binding death benefit nominations that [SMSFs] have because what happens if you have a binding death benefit nomination that was [prepared with the intention of being non-lapsing], but is more than three years old? Well potentially it’s now invalid.
“So [we could be faced] with all sorts of interesting ramifications [as a result of this High Court decision].”