Trustees beware – check with the SCT before paying the death benefit or risk paying twice

September, 2012

Where a Trustee has made a determination in respect of the distribution of a death benefit from the fund, it is required to give the potential beneficiaries 28 days to lodge any objection to that decision. Provided an objection has been lodged within that time and the Trustee has subsequently given written notice of its final decision, a complainant has 28 days from the date of receipt of the letter from the Trustee to lodge a complaint with the Superannuation Complaints Tribunal (SCT).  Unless the Trustee has not followed the correct notification procedure, the 28 day period applies and operates to restrict a complainant’s access to the SCT  in relation to that death benefit distribution decision to within the 28 day period.

A recent determination of the SCT highlights the importance of Trustees needing to check whether a complaint has been lodged with the SCT before making the death benefit distribution.  In a recent determination, no D 11 – 12 \ 092, the Trustee determined to make payment of the death benefit to the mother of the deceased member and subsequently paid the entire benefit (in excess of $130,000) in November 2008.  On 5 January 2009, the father of the deceased member lodged a complaint in respect of the Trustee’s decision.  The SCT determined (on 22 June this year) to overturn the Trustee’s decision and split the benefit equally between the deceased member’s parents.  Given that the benefit had already been paid by the Trustee to the deceased member’s mother more then 3½  years earlier, the SCT looked to the provisions of the trust deed for a power given to the Trustee to settle or compromise any claims, matters or things relating to the fund.  Having found such a power, the SCT then substituted its own decision for that of the Trustee and ordered the Trustee to pay an amount equivalent to the complainant’s entitlement to the death benefit using the Trustee’s power to compromise.  The SCT ordered the Trustee to pay that amount to the complainant within 45 days of its determination.  The effect of the SCT’s decision was that the Trustee was ordered to pay more than $65,000 of the fund’s reserve to the complainant, having decided to disburse the death benefit before the expiry of the 28 day period. In effect, it had to pay half of the death benefit again.

This decision should serve as a reminder to Trustees to check with the SCT that a complaint has not been lodged (i.e. waiting the 28 days) before disbursing the death benefit to a member’s beneficiaries.

Contact Mills Oakley

If you wish to discuss the implications of this decision or any other matter please feel free to contact:

lisa-marie-mckechnie-mills-oakley

Lisa-Marie McKechnie | Partner

Financial Services
T:+61 2 8289 5857
M:+61 418 544 716
E: lmckechnie@millsoakley.com.au

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