Private ruling: Superannuation death benefits
Published: June 2012
Ruling period: Year ending 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Was the beneficiary a death benefits dependant of the deceased at the time of the deceased's death in accordance with the definition of dependant in accordance with subsection 302-195(1) of the Income Tax Assessment Act 1997 ? | A1: Yes


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 302-10. | Income Tax Assessment Act 1997 Section 302-60. | Income Tax Assessment Act 1997 Section 302-195. | Income Tax Assessment Act 1997 Subsection 302-195(1). | Income Tax Assessment Act 1997 Paragraph 302-195(1)(a). | Income Tax Assessment Act 1997 Paragraph 302-195(1)(b). | Income Tax Assessment Act 1997 Paragraph 302-195(1)(c). | Income Tax Assessment Act 1997 Paragraph 302-195(1)(d). | Income Tax Assessment Act 1997 Section 302-200. | Income Tax Assessment Act 1997 Subsection 302-200(1). | Income Tax Assessment Act 1997 Paragraph 302-200(1)(a). | Income Tax Assessment Act 1997 Paragraph 302-200(1)(b). | Income Tax Assessment Act 1997 Paragraph 302-200(1)(c). | Income Tax Assessment Act 1997 Paragraph 302-200(1)(d). | Income Tax Assessment Act 1997 Subsection 995-1(1). | Income Tax Assessment Act 1997 Section 960-255. | Acts Interpretation Act 1901 Section 22A. | Acts Interpretation Act 1901 Section 22B. | Acts Interpretation Act 1901 Section 22C. | Acts Interpretation Act 1901 Subsection 22C(1). | Acts Interpretation Act 1901 Subsection 22C(2). | Acts Interpretation Act 1901 Subsection 22C(3). | Family Law Act 1975 Section 4AA.

Reasons for decision: Summary: The beneficiary was in a de facto relationship with the deceased in the period immediately prior to the deceased's death, because they were living together as a couple on a genuine domestic basis. Therefore, the beneficiary satisfies the requirements of a death benefits dependant. | Detailed Reasoning - Superannuation death benefits paid to a trustee of a deceased estate: Under section 302-10 of the Income Tax Assessment Act 1997 (ITAA 1997), the taxation arrangements for superannuation death benefits paid to a trustee of a deceased estate are determined in accordance with the taxation arrangements that would otherwise apply to the person or persons otherwise intended to benefit from the estate. This means that where a dependant of the deceased is expected to receive part or all of a superannuation death benefit, it will be subject to tax as if it were paid to a dependant of the deceased, and the benefit is taken to be income to which no beneficiary is presently entitled. Where a person that is not a dependant is expected to receive part or all of a superannuation death benefit, it will be subject to tax as if it were paid to a non-dependant of the deceased to that extent, and the benefit is taken to be income to which no beneficiary is presently entitled. Accordingly, in the present case, the payment from the superannuation funds paid to the trustee of the deceased estate is assessable to the trustee as income to which no beneficiary is presently entitled. The superannuation death benefits will be treated concessionally if a dependant of the deceased will benefit from the estate. Where a person receives a superannuation death benefit and that person was a dependant of the deceased, it is not assessable income and is not exempt income. It will now be determined if the beneficiary is a dependant of the deceased. | Detailed Reasoning - Death Benefits Dependant in relation to a Superannuation Death Benefit:: Subsection 995-1(1) of the ITAA 1997 states that the term 'death benefits dependant' has the meaning given by section 302-195. Subsection 302-195(1) defines a death benefits dependant as follows: 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 person just before he or she died. Under subsection 302-200(1) of the ITAA 1997 an interdependency relationship is defined as: Two persons (whether or not related by family) have an interdependency relationship under this section if: (a) they have a close personal relationship; and (b) they live together; and (c) one or each of them provides the other with financial support; and (d) one or each of them provides the other with domestic support and personal care. De facto relationship : Family relationships are clarified under section 960-255 of the ITAA 1997. The relationship between couples who are not married is treated in the same way as if they are legally married if one individual is the spouse of another because of the definition of spouse in subsection 995-1(1). The definition of 'spouse' in subsection 995-1(1) of the ITAA 1997 is as follows: · spouse of a person includes a person who, although not legally married to the person, lives with the person on a genuine domestic basis as the person's husband or wife. A deceased person's de facto spouse is therefore included in this definition of 'death benefits dependant' in paragraph 302-195(1)(a) of the ITAA 1997. The Acts Interpretation Act 1901 (the AIA) which applies to all Acts of Parliament, has a reference to de facto partners in section 22A. Section 22A states the following: For the purposes of a provision of an Act that is a provision in which de facto partner has the meaning given by this Act, a person is the de facto partner of another person (whether of the same sex or a different sex) if: (a) the person is in a registered relationship with the other person under section 22B; or (b) the person is in a de facto relationship with the other person under section 22C. De facto relationships are further identified under subsection 22C(1) of the AIA as follows: (a) are not legally married to each other; and (b) are not related by family (see subsection (6)); and (c) have a relationship as a couple living together on a genuine domestic basis. Subsection 22C(2) of the AIA states: In determining for the purposes of paragraph (1)(c) whether 2 persons have a relationship as a couple, all the circumstances of their relationship are to be taken into account, including any or all of the following circumstances (emphasis added): · the duration of the relationship; · the nature and extent of their common residence; · whether a sexual relationship exists; · the degree of financial dependence or interdependence, and any arrangements for financial support, between them; · the ownership, use and acquisition of their property; · the degree of mutual commitment to a shared life; · the care and support of children; · the reputation and public aspects of the relationship. Furthermore, subsection 22C(3) of the AIA states: no particular finding in relation to any circumstance mentioned in subsection (2) of the AIA is necessary in determining whether 2 persons have a relationship as a couple for the purposes of paragraph (1)(c). The term 'de facto relationship' is similarly defined in section 4AA of the Family Law Act 1975 (FLA). The meaning of a de facto relationship is as follows: A person is in a de facto relationship with another person if: (a) the individuals are not legally married to each other (b) the individuals are not related by family (as defined), and (c) having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis. The main issue in this case is determining if the beneficiary and the deceased were a couple living together on a genuine domestic basis. This can be a difficult matter and Australian Courts consider all of the circumstances and utilise a number of factors that are appropriate to determine if there is a de facto relationship. Considering the circumstances of the beneficiary and the deceased against some of the indicators for a couple outlined in subsection 22C(2) of the AIA would indicate they were a couple. This is based on the following:- The deceased and the beneficiary started a relationship after 1 January 2004. They had resided together on every weekend for a period of approximately few years. Although they did not live permanently at one address they stayed with each other, either at her or his residence every weekend. This would adequately satisfy paragraph 22C(2)(a) regarding the duration of the relationship. Paragraph 22C(2)(b) considers the nature of their common residence. A common residence infers that a couple are living together and sharing a household. In Hayes v. Marquis [2008] NSWCA 10; [2008] DFC 95-415; [2008] ALMD 5421; [2008] ALMD 5423 (Hayes v. Marquis) it was stated: The expression "living together" in the context of the Act is to be understood as referring to sharing a home, that is to say, cohabiting or dwelling together. The test is an objective one. It involves assessing the nature and extent of the claimed common residence. The concept of "living together" in s 5(1)(b) requires two adult persons be seen as regarding the place or places in which they live as "their home". The dominant parameter will be whether or not the individuals concerned may be discerned to regard the premises in question as their home and in so doing to be acting reasonably: The appellant in this case was denying the finding of District Court Justice McLoughlin, the primary judge in the original case, that there was a domestic relationship. In Hayes v. Marquis Justice McColl stated at paragraph 78 Central to the primary judge's characterisation of the pre-1999 relationship was the proposition that the concept of "living together" in s 5(1)(b) did not require the parties to live together fulltime. In my view his Honour was correct in approaching the case on that basis. The definition of "close personal relationship" does not require the two adults to live together fulltime. The language of s 5(1)(b) does not require such co-habitation. Further a s 5 "close personal relationship" may be contrasted with a s 4 de facto relationship. A de facto relationship is one which might ordinarily be expected to emphasise common residence. However, while the definition of a de facto relationship requires a relationship between two adult persons who live together as a couple, s 4(2) makes it plain that sharing a "common residence" full-time is not essential to a conclusion that a de facto relationship exists… It can be seen from the above Court case, a close personal relationship does not require the two adults to live together full-time. Turning to the present case, the deceased and the beneficiary maintained separate residences due to their work commitments. In the X years of their relationship, during the week the deceased slept in their own residence and spent every weekend with the beneficiary. The beneficiary and the deceased were living together in a common residence (his or her residence). Although the location of the common residence changed between the two places, the beneficiary and the deceased resided together for the last few years. This would adequately satisfy paragraph 22C(2)(b) regarding common residence. The deceased and the beneficiary were not on a sexual relationship however they shared a bed, they kissed, cuddled and were intimate. They went on holidays together. The deceased paid for their holidays. The deceased also paid for some of the beneficiary's household bills and some other personal expenses. Clearly a degree of financial support existed between them. Therefore the circumstances under paragraphs 22C(2)(c) and (d) are satisfied. Paragraph 22C(2)(f) of the AIA looks at the degree of mutual commitment to a shared life. The beneficiary and the deceased had been living together for few years. They were living in a domestic relationship like a married couple and had planned to retire together, sell their residences and move to a state and start a business together. Therefore paragraph 22C(2)(f) is satisfied. Paragraph 22C(2)(h) considers the reputation and pubic aspects of a relationship. The deceased introduced the beneficiary as a partner to the deceased's relatives and also took the beneficiary the work functions as the deceased's partner. The deceased arranged for the beneficiary to see a psychologist from the deceased's' workplace which was a free service provided for the deceased as an employee and to their partner. Accordingly, to the general public, the beneficiary and the deceased would have come across as a genuine couple. The above factors indicate the couple were living together on a genuine domestic basis. Therefore, for the purposes of subsection 995-1(1) of the ITAA 1997, the beneficiary would be considered to be the de facto spouse of the deceased in the period immediately prior to the deceased's death. Consequently, the beneficiary satisfies the requirements of a death benefits dependant specified in paragraph 302-195(1)(a). | Detailed Reasoning - The taxation treatment of a superannuation death benefits:: As the beneficiary is considered to be a death benefits dependant the beneficiary's' portion of the superannuation death benefit will be tax-free under section 302-60 of the ITAA 1997 and not to be included as assessable income in the hands of the Estate. The amount ultimately distributed from the Estate to the beneficiary will not be taxable in her hands because the amount will represent a distribution of the corpus of the Estate.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: Your client is the Trustee of a deceased estate (the Estate). | The deceased passed away in the 2009-10 income year. | The deceased left a will which did not include any provision for the beneficiary. All of the deceased's' assets were left to the deceased's siblings. | The beneficiary lodged a claim against the deceased's superannuation payment and was awarded an amount from the deceased's Superannuation Fund, stating the beneficiary was a financial dependant. | The beneficiary lodged an appeal with the Superannuation Tribunal which was later withdrawn after conciliation. | The conciliation agreement between the beneficiary and the executor of the Estate states that the payment be split in equal portions between the beneficiary and the deceased's siblings. | In the last quarter of the 2009-10 income year, the beneficiary submitted an Affidavit detailing their relationship with the deceased. The Affidavit stated the following: | · the beneficiary and the deceased had known each other for a number of years before starting a relationship a few years before the deceased's death; | · the deceased was not married and had no children; | · initially the beneficiary lived at the parent's house and the deceased lived in a separate residence for job commitments and they would meet up on weekends; | · the beneficiary moved out from the parent's house and the deceased financially supported the beneficiary by paying the beneficiary's bills; | · the deceased stayed with the beneficiary most weekends and they spoke on the phone at great length during the week; | · the beneficiary sometimes stayed at the deceased's residence; | · the beneficiary and the deceased had an intimate and exclusive, but not sexual, relationship; | · the deceased kept clothes at the beneficiary's residence; | · they went on holidays together, shopped together and worked on various renovation projects on the beneficiary's residence; | · the beneficiary and the deceased had made plans for their future, whereby after the deceased's retirement they would move in together and start a business; | · in 2007, the deceased provided personal and financial support to the beneficiary when the beneficiary had a breakdown and was unable to work and | · the beneficiary states that the relationship with the deceased was that of a 'domestic partner' or 'de facto'. They did not live in a standard arrangement because of the deceased's work and the beneficiary's family commitment made it more convenient to live separately but they saw each other every weekend and socialised as a couple and were regarded as a couple by their friends. | In the 2010-11 income year the deceased's superannuation fund paid a death benefit to the executor of the Estate.