The recent Federal Court case, Lynn v Australian Financial Complaints Authority [2025] FCA 175, has highlighted the importance of clear succession and estate planning to ensure a deceased member’s super death benefits are paid as intended, a legal specialist has said.

William Fettes, director at DBA Lawyers, said 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.

“It also has 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,” he said.

The case involved the late Richard Lynn, who was a member of AustralianSuper at the time of his death.

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. Lynn also had four adult daughters and two adult stepsons.

The deceased had made a non-binding death benefit nomination on 2 February 2018, setting out his wish that the super death benefits were to be paid to his six adult children.

Initially, the trustee of AustralianSuper decided to pay the death benefits to the deceased’s legal personal representative, but later reversed this decision, allocating 100 per cent of the benefits to his estranged spouse.

This led to one of the deceased’s daughters lodging a complaint with AFCA, which determined that the trustee's decision was not fair and reasonable and should be set aside and 50 per cent of the super death benefits should be paid to wife with the remaining 50 per cent to be paid to the six children in equal shares.

Fettes said the most recent case concerned Ms Lynn’s appeal against AFCA’s determination 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,” he said.

“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.”

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,” Fettes said.

“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, Fettes said, 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 scope and duration.

The ruling said: “… receiving 50 per cent 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 which places significant weight on financial dependency, while also considering the likely duration of that dependency and balancing competing claims from other potential beneficiaries,” Fettes added.

While AFCA did not have jurisdiction to review decisions made by SMSF trustees regarding the payment of death benefits, he said, Lynn v AFCA still served as an important cautionary tale.

“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 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.”

Fettes added that, in contrast, with an appropriately drafted SMSF deed, SMSF members can make indefinite, non-lapsing BDBNs.

“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 such as the terms of the SMSF deed and the constitution of the corporate trustee,” he said.

“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.”

However, he said, this aspect is often overlooked, with control defaulting to the surviving individual trustee or director of the corporate trustee. Without proper planning, this could lead to outcomes 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, such as one or more of his daughters,” Fettes said.

“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.”

Keeli Cambourne
May 27 2025
smsfadviser.com