Private ruling: Taxation of superannuation death benefits
Date of advice: 16 February 2018
Published: June 2018
Ruling period: Income year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Is a person (the Beneficiary) a death benefits dependant of a person who has died (the Deceased) in accordance with section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997) | A1: No

Relevant facts and circumstances: The Beneficiary is a child of the Deceased who was aged over 18 years at the time of the Deceased’s death. At the time of the Deceased’s death, the Beneficiary was unemployed and had been unemployed for a number of years. At the time of the Deceased’s death, the Beneficiary was receiving fortnightly Centrelink ‘Newstart Allowance’ payment. The Beneficiary did not live with the Deceased. They lived rent-free in a dwelling owned by a friend and contributed towards groceries and household expenses. The Beneficiary claims that the Deceased provided them with financial assistance to cover expenses which exceeded their fortnightly Centrelink payments including: ● providing the Beneficiary with at least two meals per week in the Deceased’s own home; ● purchasing a washing machine, dryer, bed, television and television unit for the Beneficiary; ● gifting $5,000 to the Beneficiary towards the purchase of a motor vehicle; ● purchasing clothing and personal effects for the Beneficiary; ● making financial contributions to assist the Beneficiary cover the expenses of the Beneficiary’s child; and ● providing small amounts of cash to cover expenses. On DD MMM YYYY, the trustee of the Deceased’s Estate received a payment (the Benefit) from Super SA.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 302-195. | Income Tax Assessment Act 1997 Section 302-200. | Income Tax Assessment Act 1997 Subsection 995-1(1).

Reasons for decision: Summary: The Beneficiary is not a ‘death benefits dependant’ of the Deceased as defined in section 302-195 of the TAA 1997. | Detailed Reasoning - Death Benefits Dependant: In accordance with subsection 302-195(1) of the ITAA 1997, a death benefits dependant , of a person who has died, is: (a) the deceased person’s *spouse or former spouse; or (b) the deceased person’s *child, aged less than 18; or (c) any other person with whom the deceased person had an interdependency relationship under section 302-200 just before he or she died; or (d) any other person who was a dependant of the deceased just before he or she died. *To find definitions of asterisked terms, see the Dictionary, starting at 995-1. As the Beneficiary is a child of the Deceased aged over 18 years, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 do not apply. In addition, facts do not indicate that the Beneficiary and the Deceased had an interdependency relationship under section 302-200 of the ITAA 1997 just before the Deceased died, therefore, paragraph 302-195(1)(c) of the ITAA 1997also does not apply. Therefore, to be a death benefits dependant of the Deceased, the Beneficiary must show that they were a ‘dependant’ of the Deceased just before they died under paragraph 302-195(1)(d) of the ITAA 1997. | Detailed Reasoning - Meaning of ‘dependant’: The term ‘dependant’ is not defined in the ITAA 1997 therefore, it has its common law meaning. According to the Macquarie Dictionary , a ‘dependant’ is: 1.one who depends on or looks to another for support, favour, etc 2. a person to whom one contributes all or a major amount of necessary financial support. Butterworth’s Australian Legal Dictionary defines ‘dependant’ as ‘a person who depends on another, wholly or substantially’. In the Victorian Supreme Court case of Fenton v. Batten [1949] ALR 69; [1948] VLR 422, Justice Fullager made the following comments regarding dependency: The word dependant is, in a true sense a technical term. If the evidence established that the alleged dependant relied on or relies on another as the source wholly or in part of his or her existence then dependence is established. Questions of scale of living do not enter into the matter in the absence of some such statutory enactment. Handing down the decision in Re Malek v. Federal Commissioner of Taxation Case [1999] AATA 678; (1999) 42 ATR 1203, (1999) 99 ATC 2294, Senior Member Pascoe of the Administrative Appeals Tribunal (AAT) further clarified the meaning of the word dependant, stating: In my view, the question is not to be decided by counting up the dollars required to be spent on the necessities of life for [Mrs Malek], then calculating the proportion of those dollars provided by the [son] and regarding her as a dependant only if that proportion exceeds 50%...In my view, the relevant financial support is that required to maintain the person’s normal standard of living and the question of fact to be answered is whether the alleged dependant was reliant on the regular continuous contribution of the other person to maintain that standard. In Case [2000] AATA 8, (2000) 43 ATR 1273; 2000 ATC 129, Senior Member Fayle in considering the definition of dependant in relation to section 27AAA of the Income Tax Assessment Act 1936 stated: The Act is primarily concerned with commercial and financial matters. An Act relating to the imposition assessment and collection of tax upon incomes. As such, a question of dependency should be construed within that context. The relevant question in this sense is whether the applicants were financially dependent on their son at the relevant time. In the current case, we accept that the Deceased provided some financial support to the Beneficiary in the form of gifts of cash, appliances, clothes and other necessities on an ad hoc basis as the need arose. However, the point to be considered is whether the facts show that the Beneficiary depended or relied on that support to maintain their normal standard of living at the time of the Deceased’s death. Based on the evidence provided, we consider that the Beneficiary did not rely on a regular continuous financial support by the Deceased to maintain their normal standard of living. Rather, immediately before the death of Deceased, the Beneficiary’s financial support came primarily from the Centrelink payments. Consequently, the Beneficiary is not a death benefits dependant of the Deceased as defined in section 302-195 of the ITAA 1997.