Court ruling highlights need for SuperStream adjustments

He said the Williams v Williams case raised the question not only about the form in which a binding death benefit nomination (BDBN) is created but the way in which the format and process must be adhered to as well to ensure that the nomination is “on foot”.

Mr Dunn explained that the Williams case carried on from the case Hill v Zuda Pty Ltd [2021] WASCA 59.

That case confirmed that regulation 6.17A of the Superannuation Industry (Supervision) Act 1993 (SIS Act) does not apply to self-managed super funds and therefore a BDBN that purports to be non-lapsing is not constrained by the requirements of that section.

This means that all non-lapsing BDBNs do not expire after three years.

“Ultimately, that decision talked about the fact that if we need to understand how a binding death benefit nomination is created, we go to the SMSF deed,” he said.

The Zuda case, he said, dealt with a question of fact around the timing of nominations that had been made, and therefore, the differences in those two nominations.

“It was the validity of those that were being put into question.”

“And the court, naturally, was looking at a range of previous decisions.”

It is due to these court ruling, he said, that the ATO is considering potential exceptions where there are issues in relation to the SuperStream system.

“It’s a bit of a relief with the regulator working quite closely with the industry and perhaps allowing some exceptions where there are things happening outside of the trustee’s control.”

“We’ve got within the regulations, of course, the SuperStream requirements that must be adhered to in terms of the three business days but we also have to look at technically how the law applies which then gives rise to the practical challenges of getting these rollovers either into a fund or from a fund.

“One of the practical things, for example, is where we have a payment that needs to be made, which is quite clearly well in advance of the fund transfer limits that can occur and this in itself can then prevent or present problems for the trustees to try and get that benefit paid and therefore comply with the three-day requirement within the regulation.”

He said there are ongoing discussions with the ATO and within the sector to try and come up with a more palatable outcome.

The discussions are focussing on how processes can still be done through the SuperStream rules in compliance with Reg 617 to ensure that ultimately can create a solution that does not also create compliance issues.

“In other words, if the process had started, and we come up against some speed humps in making that occur, that in itself would prejudice it from being a compliance breach, and therefore potentially allowing for that payment to go through and the auditor not having to raise that as an audit issue,” Mr Dunn said.

“Hopefully, we’re identifying these issues and come up with some practical responses to these because people are trying to do the right thing to comply but we know there are circumstances where that may not naturally occur.”