The long embattled question of whether Regulation 6.17A of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (“SISR”) applies to SMSFs has finally been answered.
For those playing at home, Reg 6.17A of the SISR sets out the standards of which regulated super funds are to pay a member’s superannuation benefits out when they pass away. The particular issue for many members, lawyers and advisers was the uncertainty that surrounded this issue as it related to Binding Death Benefit Nominations (BDBN).
On appeal from the Western Australia Court of Appeal, the High Court in Hill v Zuda Pty Ltd [2022] HCA 21 determined this issue in June this year.
The factual matrix of the case was that Zuda Pty Ltd was the corporate trustee of the Holly Superannuation Fund that was established in 2000. Mr Sodhy and Ms Murray were in a defacto relatinship and the only two members of the Holly Superannuation Fund. In 2011, the fund’s deed was updated to include a clause (refered to as a “BDBN”) stating that Zuda Pty Ltd, as trustee, was required to distribute a deceased member’s benefit to the surviving member of the fund. Sadly, Mr Sodhy passed away in 2016.
Mr Sodhy had one child, Ms Hill. Ms Hill commenced proceedings in the Supreme Court of Western Australia seeking that the BDBN had no force and effect on the basis that there was no notice given to Zuda Pty Ltd as required by reg 6.17A. Ms Hill agitated her position referring to both the form and time of the notice as required by the regulation.
In the first instance, the Supreme Court held that reg 6.17A of the SISR did not apply to the SMSF and therefore dismissed the application. In a further appeal to the WA Court of Appeal, the Court found that the regulation did not apply to SMSFs.
The High Court was then called upon to consider the question of statutory construction and ultimately determined that both the Supreme Court and Court of Appeal were correct that the regulation has no application to an SMSF and dismissed the appeal.
The High Court acknowledged that various decisions were refered to by the Court of Appeal that had held that the regulation had no application to SMSFs, including well-known cases of Munro v Munro [2015] QSC 61 and Re Narumon Pty Ltd [2019] 2 Qd R 247.
In dismissing the appeal, with costs, the High Court said:
That the requirements of reg 6.17A(4) concerning the giving of notice by a member of a regulated superannuation fund to the trustee of that fund do not apply to an SMSF is not surprising given that an SMSF is, by definition, a superannuation fund in which members of the fund are also directors of the corporate trustee of the fund. In the context of an SMSF, giving notice of the kind envisaged by reg 6.17A(4) as expounded in reg 6.17A(6) and (7) would be at best an exercise in formality and at worst redundant. The two purposes of reg 6.17A – enabling members to compel trustees to distribute death benefits in accordance with their wishes and ensuring that members have sufficient information – are inapt to administration of an SMSF.
Para 32.
You can read the decision here.
