A significant decision has been handed down by the South Australian Court of Appeal.
The critical issue was whether a binding death benefit nomination (BDBN) was valid.
If valid, then the death benefit was payable to the estate of the deceased member.
If invalid, then the trustee would decide the allocation of the benefit. The validity turned upon the issue of whether the BDBN had been served on the corporate trustee.
The BDBN had been signed by the member and then left in the possession of the accountants of the SMSF at their office which was also the registered office of the corporate trustee.
The sole director of the corporate trustee had argued that as the BDBN had not been provided to the director nor had the accountants been expressly authorised to accept and hold the BDBN on behalf of the corporate trustee, then the BDBN had not been served on the corporate trustee.
The Court did not accept the argument put by the corporate trustee. The Chief Justice held that it was sufficient to constitute service on the corporate trustee for the BDBN to be held by the accountants of the SMSF at the registered office of the corporate trustee. The other justices agreed with the Chief Justice.
Two interesting issues arise from this case. The first is that Court agreed with the decision of Munro v Munro – which held that SIS regulation 6.17A does not apply to SMSFs (unless the trust deed of the SMSF explicitly or implicitly incorporates the regulation). The second is that the Court opined that the accountants had a duty to keep the BDBN safe and also had a duty to bring to the attention of the trustee of the SMSF that they held the BDBN.
The decision of the Court of Appeal is reported as Cantor Management Services Pty Ltd v Booth [2017] SASCFC 122.
Michael Hallinan
Special Counsel Superannuation
Townsends Business & Corporate Lawyers
t: (02) 8296 6205
Twitter: @TownsendsLaw
michael@townsendslaw.com.au
townsendslaw.com.au