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Edited version of private advice

Authorisation Number: 1051892305399

Date of advice: 6 September 2021


Subject: Financial dependency


Is the applicant (the Beneficiary) a death benefits dependant of the deceased in accordance with section 302-195 of the ITAA 1997?



This ruling applies for the following period:

Income year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The Deceased passed away on 18 July 20XX.

The Deceased had XX children, of which one is the Beneficiary.

The Deceased was a member of a superannuation fund (the Fund).

The Beneficiary is the sole executor and trustee of the Deceased's estate (the Estate).

The Fund paid the Deceased's death benefits to the Estate in two amounts.

The Deceased's will named the Beneficiary as one of the Deceased's death benefits beneficiaries.

The Beneficiary is married and has XX children.

The Beneficiary and the Deceased lived in separate residences.

Both the Beneficiary and their spouse's tax returns show that they worked sporadically.

The Beneficiary and their spouse did not receive any Centrelink benefits.

The Deceased transferred amounts of money to the Beneficiary between the 20XX and 20XX income years.

The Deceased intended for these amounts to be used by the Beneficiary to pay for their family's living expenses, and to meet their family's financial obligations.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 302-195

Income Tax Assessment Act 1997 Section 302-200

Income Tax Assessment Regulations 1997 Regulation 302-200.01

Income Tax Assessment Regulations 1997 Regulation 302-200.02

Reasons for decision

Death Benefits Dependant in relation to the 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 of the ITAA 1997.

Subsection 302-195(1) of the ITAA 1997 defines a death benefits dependant as follows:

(1) 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.

The facts of this case demonstrate that paragraphs 302-195(1)(a), 302-195(1)(b) or 302-195(1)(c) of the ITAA 1997 do not apply to the Beneficiary

Therefore, we will determine if the Beneficiary was a dependant of the deceased person just before he or she died in accordance with paragraph 302-195(1)(d)

Financial dependency

A person may also qualify as a death benefits dependant where they were a dependant of the deceased person just before he or she died, per paragraph 302-195(1)(d) of the ITAA 1997.

According to the Macquarie Dictionary (2000 multimedia edition), one meaning of the term dependant is 'a person to whom one contributes all or a major amount of necessary financial support'.

In the CCH Macquarie Concise Dictionary of Modern Law, a dependant is defined as being 'a person substantially maintained or supported financially by another'.

In both dictionary definitions the emphasis is on the fact that the financial support or maintenance is substantial. In determining whether a person is a dependant it is necessary to establish the actual level of financial support that was provided to that person by the deceased. This is because dependence is assessed on the basis of the actual fact of dependence or reliance on the earnings of another for support. This is a question of fact (Aafjes v. Kearney (1976) 180 CLR 199, per Chief Justice Barwick).

Senior Member Fayle of the Administrative Appeals Tribunal (AAT), in Case [2000] AATA 8, in considering the definition of 'dependant' in relation to former section 27AAA of the ITAA 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."

Where the level of financial support provided to a person is substantial then that person can be regarded as a dependant. A financial dependant is considered to be a person to whom another person contributes all or a major amount of necessary financial support. If the level of financial support is insignificant or minor, beyond a level of subsistence, then the person should not be characterised as a dependant in terms of paragraph 302 195(1)(d) of the ITAA 1997.

In the case of Aafjes v Kearney (1976) 180 CLR at page 207 Gibbs J cited the High Court case of Kauri Timber Co (Tas) Pty Ltd v Reeman (1973) 128 CLR 77 at pages 188-189, and further clarified uncertainty concerning dependency noting:

"...but it does not follow from it that a person who in fact receives some support from one person cannot properly be said to be wholly dependent on another. It is not the mere fact of receipt of support but the dependence or reliance upon another to provide it that matters." [Emphasis added]

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 dependent 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 their existence, then dependence is established. Questions of scale of living do not enter into the matter in the absence of some such statutory enactment."

These comments made in Fenton v. Batten when read in the context with the facts established in that case, confirm the definition of dependent contained in the CCH Macquarie Dictionary of Modern law and the meaning quoted above from the Macquarie Dictionary.

In the full High Court case of Kauri Timber Co. (Tas) Pty Ltd v. Reeman (1973) 128 CLR 177, Justice Gibbs (as he then was) in speaking of previous cases on the issue of dependency stated that:

"The principle underlying these authorities is the actual fact of dependence or reliance on the earnings of another for support that is the test."

Handing down the decision in Re Malek v. Commissioner of Taxation (Cth) Case [1999] AATA 678 (Malek), Senior Member Pascoe 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 their as a dependant only if that proportion exceeds 50%...In my view, the relevant financial support is that required to maintain the persons 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 Malek, the evidence supplied by the taxpayer was able to demonstrate that the financial support received from their deceased son had been significant. The son had accepted responsibility for mortgage repayments, maintenance and other expenses of the unit in which the taxpayer lived.

That dependency involves more than the mere receipt of support, but also reliance on it, was affirmed by Hamilton J in Griffiths v Westernhagen [2008] NSWSC 851, [58]:

"For a relationship of dependency to be established, there must be more than the mere giving of money. Rather there must be a relationship where one party relies on the other for what is required for their ordinary living."

The tenor of the case law noted above refers to a level of dependency to maintain the dependant's ordinary living (Griffiths v Westernhagen), normal standards of living (Malek's case) and relying on another as a means of subsistence (Kauri Timber Co (Tas) Pty Ltd).

If the financial support provided merely supplements the person's income and represents quality of life payments, then it would not be considered substantial support.

In this case, the point to be considered is whether the facts show the Beneficiary depended or relied on the payments from the Deceased to maintain their ordinary standard of living at the time of the Deceased's death.

The Beneficiary did not have a main source of income and relied on the financial support given to them by the Deceased. Therefore, it can be said that the Deceased provided continuous support for the Beneficiary to maintain this standard of living.

As the Beneficiary was reliant on this support, they meet the test for financial dependency. As such the Beneficiary will be treated as a death benefit dependent within the meaning in paragraph 302-195(1)(d) of the ITAA 1997.