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How long can an SMSF BDBN last for? The High Court answers in Hill v Zuda

The High Court of Australia has settled the debate on how long an SMSF BDBN can last for. Implicitly this judgement also provides support in answering other critical SMSF succession planning questions, such as:

  • Can a BDBN make a pension reversion mid-stream?
  • Can a BDBN override pension documentation?
  • Do you actually want a BDBN to override pension documentation? (Spoiler alert: Yes)
  • Is an ‘SMSF will’ worthwhile?

The case: Hill v Zuda

For those who want full details:

A summarised version of the facts are as follows:

Mr Sodhy had one biological child: Ms Hill. Mr Sodhy’s spouse was Ms Murray. Ms Murray appeared to be Ms Hill’s step mother (ie, Ms Hill was not Ms Murray’s biological child).

Mr Sodhy and Ms Murray were in an SMSF together. The trustee of the SMSF was Zuda Pty Ltd. On 13 December 2011, the SMSF’s trust deed was amended to insert a clause described as a binding death benefit nomination (BDBN) according to which, if either Mr Sodhy or Ms Murray died, Zuda Pty Ltd was required to distribute the whole of the deceased member’s balance in the SMSF to the surviving member. Mr Sodhy then died on 22 November 2016.

Ms Hill challenged this. She said that reg 6.17A of the Superannuation Industry (Supervision) Regulations 1994 (Cth) applies to SMSFs. Regulation 6.17A provides, among other things, that a notice that binds a trustee as to how to pay superannuation death benefits ceases to have effect at the end of a period of three years after the day it was first signed.

Ms Hill submitted that the BDBN was of no force and effect due to, among other things, reg 6.17A applying and because the BDBN was made more than three years before her father’s death.

The High Court engaged in an analysis of the text of reg 6.17A and also considered the statutory context, including extrinsic material, namely the explanatory statements that introduced reg 6.17A. For those interested in the exact reasoning, see paragraphs 27–33 of the full text judgement.

The High Court held ‘reg 6.17A has no application to an SMSF. [Ms Hill’s] appeal must therefore be dismissed.’

Key implications of this case

The ‘headline’ implication of this case is that an SMSF BDBN can last indefinitely, and not three years. (However, this of course is contingent on the SMSF’s deed allowing this.)

The other implications are also significant. The fact that reg 6.17A does not apply to SMSFs means that — so long as the SIS legislation is not infringed — the SMSF trust deed is left to do its work and is very much the supreme document governing how the fund is run.

Can a BDBN make a pension reversion mid-stream?

One practical implication of reg 6.17A not applying to SMSFs (ie, of the SMSF trust deed being the supreme governing document) is that yes, a BDBN can make a pension reversionary mid-stream.

Naturally, of course this is contingent on the SMSF’s deed allowing this.

Can a BDBN override pension documentation?

Another implication is that yes, a BDBN can override pension documentation.

Naturally, of course this is contingent on the SMSF’s deed allowing this.

Do you actually want a BDBN to override pension documentation?

Hill v Zuda supports the proposition that yes, it is possible to have a BDBN that can override pension documentation. This then begs the question: is that something that people actually want?

I firmly believe that the answer is yes: when fully informed, advisers do want a deed that overrides any pension documentation. I will now explain why.

Sometimes adviser think they want pension documentation that overrides a BDBN. They think using such documentation will allow them to make a BDBN in favour of the client’s estate and also pension documentation that says upon death the pension reverts to a spouse. They think this allows them to easily implement a ‘bifurcated’ SMSF succession planning strategy. However, what they have actually done is caused problems. One problem is that the adviser is probably engaging in legal practice, which of course only a lawyer should engage in. Secondly, when the executor of the estate sees a BDBN that says all SMSF benefits to the estate, but the estate does not receive all the SMSF benefits, there is a real risk that the executor might challenge the SMSF. Thirdly, a much simpler solution is available: make a BDBN that acknowledges the situation. The BDBN could say that yes, the pension does revert, and any SMSF accumulation interest upon death goes to the estate. Naturally such a BDBN should be drafted by a lawyer. (And honestly, I think that is why certain accountants and financial planner don’t want to implement this solution — they don’t want to encourage their client to engage a lawyer to draft such a document, which I feel is simply being penny wise pound foolish.)

So, that was the main reason why advisers think they want pension documentation that overrides a BDBN and why I think that that reason doesn’t really stack up.

So why is it good for a BDBN to override a pension?

Well, here’s one reason (there are many more). Consider a pension that is commenced without much consideration to succession planning. A few years into the pension, the pensioner decides it would be best if that pension automatically reverted upon death to the pensioner’s spouse. If the:

  • SMSF’s deed allows the BDBN to override the pension;
  • SMSF’s deed allows the BDBN to make the pension reversionary ‘mid-stream’; and
  • the SMSF’s deed comes with a template BDBN with an option that says words to the effect of ‘tick here to ensure that any account-based pension being received is not just paid to the nominated beneficiary but is paid to that beneficiary by way of that pension automatically reverting upon my death’

then it is very easy — and cost efficient — to implement the SMSF member’s wish.

(I note that the DBA Lawyers’ deed and template BDBN do allow for all of the above.)

Is an ‘SMSF will’ worthwhile?

Firstly, it’s worth defining what an SMSF will is. ‘SMSF will’ is not a defined term. However, people often use it to mean the following: a document that a member signs that forces the SMSF trustee to pay their superannuation death benefits in a particular way. On its face, this is exactly what a BDBN is. However, an SMSF will is designed to be different to a BDBN because an SMSF will is supposed to form part of the governing rules of the SMSF. Thus, the idea behind the SMSF will is that it is supposed to side-step the ‘three year or indefinite’ BDBN debate. It is supposed to do this because, unlike a BDBN where the BDBN binds the trustee, in the SMSF will it is the governing rules that bind the trustee.

This is a very fine distinction to draw. However, the SMSF trustee did try to raise this in Hill v Zuda Pty Ltd (presumably this is why the BDBN was written in the deed, rather than being a freestanding document). The SMSF trustee and Ms Murray stated in their response in the High Court (emphasis in the original):

The distinction between a requirement imposed on the trustee by the deceased during his or her lifetime as permitted by the governing rules, and a requirement imposed on the trustee by the terms of the governing rules themselves, is a real one. In any event, the language of sub-reg 6.17A(4) in this respect is clear, and there is no scope for reading it as applying to a requirement imposed on the trustee by the terms of the governing rules themselves.’

The High Court dismissed this very quickly and literally parenthetically stating (emphasis added):

That the BDBN was a notice given to Zuda by each of Mr Sodhy and Ms Murray was undisputed before the Master and the Court of Appeal, and (notwithstanding an attempt by Zuda and Ms Murray to resile from what had been common ground manifested in an application for revocation of special leave to appeal, which is refused) remains undisputed on the appeal.


Hill v Zuda is excellent news for the SMSF community. It confirms that with the right deed, SMSF BDBNs can last indefinitely, and not just for three years.

Furthermore, Hill v Zuda indicates that the SMSF deed — not reg 6.17A — is the supreme governing document for SMSFs. Accordingly, this allows SMSF deeds to have all sorts of flexible and beneficial strategies, such as allowing BDBNs to override pensions and make pensions reversionary ‘mid-stream’.

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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 monthly online SMSF training. For more details or to register, visit or call 03 9092 9400.

For more information regarding how DBA Lawyers can assist in your SMSF practice, visit

By Bryce Figot ([email protected]), Special Counsel, DBA Lawyers

16 June 2022

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