Private ruling: Death Benefit - Dependant
Published: November 2014
Ruling period: The year ended 30 June 2014.
Date scheme commenced: 1 July 2013.

Ruling: Q1: Was the Deceased's partner a death benefit dependant of the deceased? | A1: Yes.

Relevant facts and circumstances: The Deceased died some time ago. The Deceased left a will appointing their partner as the sole executor and Trustee of the Deceased's estate. The Will provided for the whole of the estate of the Deceased, both real and personal to be distributed to their partner (the Partner). The Deceased and their Partner were in a same sex de-facto relationship at the time of the deceased's death and the Partner was listed as the Deceased's partner on the Deceased's death certificate. The Deceased and their Partner had been in a relationship for quite some time and had been living together in the same property for the duration of their relationship. The Partner passed away prior to the commencement of the relevant income year. The legal personal representative of the estate of the Partner discovered that there was an unclaimed superannuation death benefit payment from the Deceased's estate that the Partner was entitled to as the sole beneficiary. The Deceased was a member of an Australian superannuation fund and there was no nominated beneficiary under this superannuation policy. The death benefit payment was paid into the Deceased's estate during the relevant income year. The death benefit payment is to be distributed to the Partner's estate.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 302-10. | Income Tax Assessment Act 1997 section 302-195. | Income Tax Assessment Act 1997 section 995-1.

Reasons for decision: Summary: The Partner was the spouse of the Deceased and accordingly considered to be a death benefit dependant. Therefore, the payment of the superannuation death benefit from the Deceased's Estate to the Estate of the Partner is considered to be neither assessable income nor exempt income. | Detailed Reasoning - Detailed reasoning: Division 302 of the ITAA 1997 sets out the taxation arrangements that apply to the payment of superannuation death benefits. These arrangements depend on whether the person who receives the superannuation death benefit is a dependant of the deceased or not and whether the amount is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit. 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. Section 302-195 of the ITAA 1997 defines 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. As the Deceased was in a same sex domestic and committed relationship with their Partner, paragraph (a) of section 302-195 of the ITAA 1997 needs to be examined to determine if the Partner was the deceased's spouse. The definition of spouse in section 995-1 of the ITAA 1997 relevantly states: spouse of an individual includes: (a) another individual (whether of the same sex or a different sex) with whom the individual is in a relationship that is registered under a State law or Territory law prescribed for the purposes of section 2E of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section; and (b) another individual who, although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple. As the Deceased had lived with their Partner on a genuine domestic basis in a relationship as a couple for quite some time up until the Deceased's date of death, under the definition above, the Partner was the 'spouse' of the deceased during that period. Accordingly, the Partner is a 'spouse' for the purposes of paragraph 302-195(1)(a) of the ITAA 1997 and consequently a 'death benefits dependant' pursuant to section 302-195. | Detailed Reasoning - Taxation treatment of death benefit payment: Division 302 of the ITAA 1997 sets out the taxation arrangements that apply to the payment of superannuation death benefits. These arrangements depend on whether the person who receives the superannuation death benefit is a dependant of the deceased or not and whether the amount is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit. Where a person receives a superannuation death benefit and that person was a dependant of the deceased, the superannuation death benefit is considered to be neither assessable income nor exempt income. Under section 302-10 of the 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/s intended to benefit from the estate. This means a superannuation death benefit paid to the trustee of an estate is taxed in the hands of the trustee in the same way it would be taxed if paid directly to the beneficiary. That is, portions of the death benefit payment are subject to tax to the extent that the beneficiaries are dependants or non-dependants of the deceased. As it has been determined that the Partner was a death benefits dependant of the Deceased within the definition of section 302-195 of the ITAA 1997, the payment of the superannuation death benefit from the Estate of the Deceased to the Estate of the Partner is considered to be neither assessable income nor exempt income.