Birchstone Brief for the week ended 7 May 2021

News and Events

We will be releasing a special edition of the Birchstone Brief this week to cover the key tax measures announced in the 2021-22 Federal Budget. Watch this space!

Dan’s Deliberations

SMSFs and Binding Death Benefit Nominations (BDBNs)

The decision of the WA Supreme Court in Hill v Zuda Pty Ltd [2021] WASCA 59 (summarised below) is yet another decision on whether SMSFs need to comply with regulation 6.17A of the Superannuation Industry (Supervision) Regulations 1994 for BDBNs to be valid. In particular, reg 6.17A requires a BDBN to be witnessed by 2 witnesses and that the nomination expires after 3 years.
WA Supreme Court ultimately concluded that SMSFs do not need to comply with reg 6.17A, but instead of resolving the issue once and for all, it has left the door open for the issue to be revisited again in the future.
The ATO’s view is that reg 6.17A does not apply to SMSFs. In SMSFD 2008/3 the ATO states:
Section 59 of the Superannuation Industry (Supervision) Act 1993 (SISA) and regulation 6.17A of the Superannuation Industry (Supervision) Regulations 1994 (SISR) do not apply to self managed superannuation funds (SMSFs). This means that the governing rules of an SMSF may permit members to make death benefit nominations that are binding on the trustee, whether or not in circumstances that accord with the rules in regulation 6.17A of the SISR. [Emphasis added]

The Queensland Supreme Court also concluded that reg 6.17A does not apply to SMSFs in the decisions of Munro v Munro [2015] QSC 61 [36] and Re Narumon Pty Ltd [2018] QSC 185. As did the Full Court of the SA Supreme Court in Cantor Management Services Pty Ltd v Booth [2017] SASCFC 122.
Given this authority, you would be forgiven for thinking this issue had been resolved. However, while WA Supreme Court in Hill v Zuda ultimately found that the SMSF did not need to comply with reg 6.17A in line with the authority, it appears to have done so somewhat reluctantly. The WA Supreme Court considered itself bound by the decision of the Full Court of the SA Supreme Court in Cantor Management:
Putting aside intermediate appellate court authority [in Cantor Management] to the contrary, the construction advanced by the appellant [that reg 6.17A does apply to SMSF] appears to us to be reasonably arguable. However, in our view, this court should accept the construction adopted in Cantor Management until such time as the decision is overruled by the High Court. On that basis, we regard ourselves as bound to construe reg 6.17A of the SIS Regulations as not applying to self managed superannuation funds. [Emphasis added]

The validity of BDBNs are coming under increasing scrutiny with the continued growth in estate disputes. To ensure a BDBN is valid and can withstand scrutiny, our recommendations include:

  1. Read the trust deed and strictly follow the procedure specified in it for making a BDBN. The Courts have held that close enough is not good enough when making BDBNs. Many SMSF trust deeds will require (either explicitly or through a wide deeming clause importing the SIS regulations) that reg 6.17A is complied with. Consider amending the deed if the procedure is too onerous.
  1. Even if the trust deed does not require compliance with reg 6.17A (which we think is acceptable), we recommend that you comply with the witnessing requirements in reg 6.17A(6) anyway, and that the nomination be confirmed following the procedure in the deed at least every 3 years. While this may be unnecessary, we consider it a prudent step should a Court (potentially the High Court) ever decide that reg 6.17A does apply to SMSFs. Confirming BDBNs can form part of an estate planning review for your clients, which should occur at least every 3 years.

ATO Update

The ATO has issued the following rulings:

  • Class Ruling CR 2021/31 – The Citadel Group Limited – scheme of arrangement and payment of special dividend;
  • Class Ruling CR 2021/32 – Ampol Limited – off-market share buy-back;
  • Class Ruling CR 2021/33 – Red Hot Australia HoldCo Pty Limited – scrip for scrip roll-over; and
  • Product Ruling PR 2021/3 – Income tax: taxation consequences of changing the portfolio structure, contributing to and partially redeeming an investment in a unit in the Perpetual WealthFocus Investment Advantage Fund – 2021.


Hill v Zuda Pty Ltd as trustee for The Holly Superannuation Fund [2021] WASCA – SMSF binding death benefit nomination

The Supreme Court of Western Australia has held that reg 6.17A of the SIS Regulations does not apply to SMSFs, meaning that a binding death benefit nomination did not expire after 3 years.

This case concerned a deceased’s SMSF, whose members were the deceased and his de facto partner. In 2011, prior to the deceased’s death in 2016, the SMSF rules were replaced by an amending deed which included a binding death benefit nomination. 

The issue in dispute was whether the amending deed constituted a valid binding death benefit nomination. Regulations 6.17A of the SIS Regulations prescribes the form that a death benefit nomination must take, including witnessing requirements and that the nomination expires after 3 years. However, in following South Australian authority, the Court of Appeal held that reg 6.17A of the SIS Regs does not apply to SMSFs. Therefore, the Court held that the binding death benefit nomination contained in the amending deed was valid.

University of Melbourne v Commissioner of State Revenue [2021] VSC 156 – Victorian Land Tax

The Supreme Court of Victoria has held that the University of Melbourne was exempt from land tax on land it leased out to a student accommodation provider. 

The University of Melbourne leased land to CLVM for the purposes of providing student accommodation. CVLM constructed a student accommodation facility on the land known as ‘Student Village’, which was operated by specialist student accommodation provider ‘Campus Living’.  In 2019, the Commissioner of State Revenue issued a land tax assessment to the University of Melbourne. The University of Melbourne objected to the land tax assessment on the basis that they were exempt from land tax under section 74 of the Land Tax Act 2005 (Vic). Section 74(1)(a) provides an exemption from land tax if the land is used by a charitable institution exclusively for charitable purposes.

The issue before the Court was whether the land was used by the University of Melbourne exclusively for charitable purposes, because the land was leased to CVLM to operate the accommodation facility.  The Court held that the University of Melbourne did use the land exclusively for charitable purposes, even though it was CVLM (which was not a charitable institution) that operated the student accommodation facility.

Spencer v FCT [2021] AATA 1106 – Work-related deductions

The AAT has largely denied a taxpayer’s claim for work-related deductions.

The taxpayer was employed as a ‘Water Services Operator’ for TasWater, which involved water and sewerage sampling, repairs works, and responding to emergency call-outs. In the 2017 and 2018 income tax years, the taxpayer claimed various deductions to which the ATO denied:

  • car expenses ($6,600 for both years);
  • clothing expenses ($20 for bamboo socks);
  • internet expenses ($130 in 2017 and $680 in 2018); and
  • mobile expenses ($239 in 2017 and $568 in 2018).

The issue before the AAT was whether the taxpayer was entitled to deductions for those amounts. The taxpayer’s job description did not require ad hoc visits to work sites outside of work hours, meaning that car expenses for visiting work sides outside of his on-call roster was not travel undertaken in the course of producing his assessable income. Accordingly, the AAT reduced the taxpayer’s allowable car expenses to $4,236. The deductions for bamboo socks were disallowed because the clothing was not protective. Lastly, the allowable deductions for internet and expenses (above the $50 allowed by the ATO) were denied due to the lack of contemporaneous records.


Australian Charities and Not for profits Commission Amendment (Register Information) Regulations 2021 – ACNC Regulations amended

The Government has registered regulations which amend the ACNC Regulations to expand disclosure of information on the political donations and electoral expenditure of registered charities.

Exposure draft materials: Miscellaneous amendments

The Government has released exposure draft materials which propose minor and technical amendments to the Treasury portfolio laws, including income tax, GST and superannuation.

TPRE 2021/D  – Exemptions from reporting regime

The ATO has released a draft legislative instrument which provides exemptions from reporting information to the Commissioner about certain transfers of shares or units required under section 396-55 of Schedule 1 to the Taxation Administration Act 1954 (Cth).

Payroll Tax Amendment (Jobs Plus) Bill 2021 (NSW) – NSW introduces Jobs Plus Bill

The Bill which makes changes to the Payroll Tax Act 2007 (NSW) has been introduced into the NSW Parliament. The Bill makes amendments to:

  • exempt employers from liability to pay payroll tax on wages that are the subject of Jobs Plus agreements; and
  • extend an exemption in relation to the Aged Care Workforce Retention Grant Opportunity program of the Commonwealth.


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