The recent Federal Court case of Lynn v Australian Financial Complaints Authority [2025] FCA 175 involved a legal challenge to a determination made by the Australian Financial Complaints Authority’s (AFCA) on payment superannuation death benefits from a large public-offer fund.
The case provides useful guidance on AFCA’s role in handling death benefit complaints, the grounds for challenging its determinations, and AFCA’s limited role in appeal proceedings.
The case highlights important lessons from a succession planning perspective that advisers should consider, particularly in situations where a member is in the midst of a relationship breakdown with no binding death benefit nomination in place.
This article examines the key lessons and guidance provided by the case.
Background facts
The late Richard Lynn was a member of AustralianSuper at the time of his death. Mr Lynn was legally married to Ms Lynn at the time of his death in December 2021. However, the couple was estranged and had separated on 5 June 2020 with Family Court orders (by consent) already in place to progress a finalisation of their financial and property affairs. Mr Lynn also had four adult daughters and two adult stepsons.
Mr Lynn had made a non-binding death benefit nomination (Nomination) on 2 February 2018 setting out his wish that the superannuation death benefits were to be paid to his six adult children.
Initially, the trustee of AustralianSuper decided to pay the death benefits to Mr Lynn’s legal personal representative, but later reversed this decision, allocating 100% of the benefits to Ms Lynn.
This led to one of Mr Lynn’s daughters lodging a complaint with AFCA. Relevantly, AFCA determined that:
- the trustee’s decision was not fair and reasonable and should be set aside; and
- 50% of the superannuation death benefits should be paid to wife with the remaining 50% to be paid to the six children in equal shares.
The decision
The case concerned Ms Lynn’s appeal against AFCA’s decision to overturn the decision of the AustralianSuper trustee. She argued that AFCA had misapplied relevant provisions of the Superannuation Industry (Supervision) Act 1993 (SISA) and the relevant trust deed by disregarding her status as a financial dependant and spouse.
However, the Court held that there was nothing in AFCA’s reasons that disclosed any misconception on its part as to its statutory task, and it accorded the wife procedural fairness through the many opportunities extended to her to provide information and by the appropriate distribution of material to all relevant parties. Accordingly, the appeal was dismissed.
Relevant factors — limited financial dependency
AFCA’s original determination took into account a range of relevant factors, including the couple living apart, mutual domestic violence restraining orders, and ongoing divorce proceedings. These circumstances informed AFCA’s view that Ms Lynn had only a limited future expectation of financial support from the deceased.
AFCA noted that ‘the purpose of superannuation death benefits [is] to provide for those people who were financially reliant on the deceased member at or around the date of death and who might have expected continuing financial support… but for the member’s death.’
In this context, AFCA found that Ms Lynn’s financial dependency (based on her expectation of ongoing financial support in relation to two joint mortgages and related property costs) was limited in both scope and duration:
… receiving 50% of the benefit was fair and reasonable as this represented the approximate expenses Ms Lynn would have had during the period of 18 months following the date of Mr Lynn’s death. Eighteen months was the period of time during which the decision-maker considered it would be reasonable to assume that a property settlement and divorce would have been finalised had Mr Lynn not passed.
This outcome aligns with AFCA’s published approach to death benefit complaints (see AFCA’s published guidance: The AFCA Approach to superannuation death benefit complaints), which places significant weight on financial dependency, while also considering the likely duration of that dependency and balancing competing claims from other potential beneficiaries.
AFCA’s role
In her judgement, Banks-Smith J outlined a number of key points about AFCA’s role in reviewing trustee decisions about superannuation death benefits as summarised below:
- Disputes arising from decisions made by APRA-regulated superannuation fund trustees can be reviewed by the AFCA under Division 3 of Part 7.10A of the Corporations Act 2001 (Cth) (CA).
- Specifically, s 1053(1)(j) provides a mechanism for complaints to be brought to AFCA in relation to decisions about death benefits payments that are ‘unfair or unreasonable’ (see s 1055 of the CA).
- Under s1055(1) of the CA, AFCA has all the powers, obligations, and discretions of the original decision-maker (eg, a superannuation trustee).
- AFCA’s role is to determine whether there was ‘unfairness or unreasonableness’ in how a decision operates in relation to the complainant, rather than the legality of the trustee’s exercise of power.
- AFCA conducts a fresh hearing of the matter.
- If satisfied a decision is fair and reasonable, AFCA must affirm it (s 1055(3) of the CA)
- If satisfied a decision is unfair or unreasonable, AFCA may vary it, set it aside, or remit for reconsideration (s 1055(5) and (6) of the CA)
- AFCA’s powers are not judicial in nature – rather than adjudicating existing legal rights, AFCA can create new rights between parties to remove unfairness or unreasonableness.
- AFCA must not make a determination contrary to law or the rules of the relevant superannuation fund or policy (s1055(7) of the CA).
The applicant’s right to bring a challenge
AFCA’s decisions can only be challenged in the Federal Court on questions of law under s 1057(1) of the Corporations Act (Cth) 2001. Challenges may include allegations that AFCA misapplied legislation, misunderstood obligations under the trust deed, breached procedural fairness, or made determinations without sufficient evidential basis.
Further, any challenges are subject to AFCA’s special rules as noted below:
Expressed generally, the Rules provide that decision-makers are not bound by the rules of evidence… AFCA will generally share information provided by a party with the other parties in the complaint [but it does not have to] … AFCA does not have the power to conduct a hearing… Nor can it compel the attendance of a witness.
In her appeal, Ms. Lynn raised several arguments, asserting errors regarding AFCA’s consideration of her marital status, allegations of procedural unfairness, and challenges to AFCA’s interpretation of evidence relating to ongoing dependency and financial obligations.
However, the Court dismissed the appeal, noting AFCA had correctly applied the legislation and sufficiently justified its decision. The Court held, ‘It follows that it was open to AFCA to find…that it was not fair and reasonable that the whole benefit be paid to Ms. Lynn.’
AFCA’s ability to make submissions in the context of being the respondent
AFCA made submissions in the case in relation to its powers and procedures. The submissions also addressed (on a limited basis) the amended grounds of the appeal put forward by Ms Lynn as the applicant. Further, AFCA provided relevant documentation to the Court regarding what was before it for the purposes of its prior determination, and provided other assistance (eg, preparing an appeals book and a book of authorities) in the context of Ms Lynn being a litigant in person.
The Court considered this participation and provided useful commentary on the appropriateness of AFCA’s role in the proceedings. In particular, the Court noted that though it is unusual for a tribunal or like-body to make submissions in an appeal from its own decision, such participation is not excluded by virtue of the High Court’s caution that a tribunal’s impartiality may be jeopardised in future proceedings if it becomes a ‘protagonist’ (see R v Australian Broadcasting Tribunal; Ex parte Hardiman (1980)).
The Court considered that, given the absence of a contradictor, AFCA’s submissions were appropriately measured.
Succession planning lessons for SMSF members and advisers
The case highlights broader lessons about the importance of clear succession and estate planning to ensure that a deceased member’s superannuation death benefits are paid as intended.
While AFCA does not have jurisdiction to review decisions made by SMSF trustees regarding the payment of death benefits, Lynn v AFCA still serves as an important cautionary tale for SMSF members and advisers. It illustrates the kinds of disputes that can arise in public-offer funds and underscores the comparative advantages that SMSFs can offer in managing such risks through effective succession planning.
In large APRA-regulated public-offer funds, binding death benefit nominations (BDBNs) can be difficult to implement effectively. These nominations typically lapse after three years unless renewed, and not all funds offer the ability to make binding nominations. In contrast, with an appropriately drafted SMSF deed, SMSF members can make indefinite, non-lapsing binding death benefit nominations. See the following article for further information: The BDBN landscape post-Hill v Zuda.
Importantly, SMSFs provide greater control over who acts as trustee (or a director of a corporate trustee) in the event of a member’s death or loss of capacity, through the relevant constituent documents, eg, the terms of the SMSF deed and the constitution of the corporate trustee (if applicable). While BDBNs direct the trustee to distribute death benefits in a particular way, it is the trustee who retains day-to-day control over the fund. Practically, this means that succession to trustee control is often the most critical element in SMSF succession planning.
Unfortunately, this aspect is often overlooked, with control defaulting to the surviving individual trustee or director of the corporate trustee. Without proper planning, this can lead to outcomes that are inconsistent with the deceased member’s wishes.
For example, if Mr Lynn had been a member of an SMSF and the sole director of its corporate trustee, he could have made a non-lapsing BDBN and structured control of the fund to pass to a trusted person, eg, one or more of his daughters.
Thus, the case serves as a timely reminder for SMSF members and advisers about the importance of SMSF succession planning. SMSFs can offer superior flexibility in both making BDBNs and planning succession at the trustee level. When used effectively, these features can significantly reduce the risk of post-death disputes and ensure that a member’s wishes are more likely to be carried out.
Conclusions
The case provides valuable guidance on AFCA’s role in superannuation death benefit complaints and the limited grounds on which its determinations can be challenged.
It also underscores the importance of proactive planning around superannuation death benefits through instruments such as BDBNs and other succession planning measures, particularly in the context of complex or evolving family circumstances.
With proper planning and clear documentation, the risk of disputes and family conflict can be significantly reduced, helping to ensure that superannuation death benefits are distributed in accordance with the deceased member’s wishes.
Related articles:
- The BDBN landscape post-Hill v Zuda
- We now have greater certainty with SMSF BDBNs
- Can a surviving spouse claim their deceased spouse’s super when they are also the executor of their estate?
- Why is Katz v Grossman different to Wareham v Marsella?
- BDBNs – what to look out for and what to avoid
- Binding v. non-binding death benefit nominations
- SMSF Wills versus BDBNs — What is best?
- SMSF Succession Planning — Part 2 — The Role of Binding Death Benefit Nominations
- 2017 Supreme Court challenge to BDBN fails due to valid service on corporate trustee
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This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional. The above does not constitute financial product advice. Financial product advice can only be obtained from a licenced financial adviser under the Corporations Act 2001 (Cth).
Note: DBA Lawyers presents regular SMSF Online Updates. For more details or to register, visit www.dbanetwork.com.au or call 03 9092 9400.
For more information regarding how DBA Lawyers can assist in your SMSF practice, visit
By William Fettes, Director ([email protected]) and Cassandra Hurley, Lawyer ([email protected]), DBA Lawyers
DBA LAWYERS
14 May 2025
