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Edited version of private advice
Authorisation Number: 1051919840124
Date of advice: 21 November 2021
Subject: Superannuation death benefit - financial dependency
Are the Beneficiaries death benefits dependants of the Deceased according to section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997), due to being financial dependents of the Deceased just before he died?
This ruling applies for the following period:
Income year ending 30 June 20XX.
The scheme commences on:
1 July 20XX.
Relevant facts and circumstances
• The Beneficiaries are the adult children of the Deceased.
• Two of the Beneficiaries lived permanently with the Deceased. The third Beneficiary returned to live with the Deceased when they became ill.
• In 20XX, the Deceased became ill and had emergency surgery.
• During the 20XX-XX income year Deceased was repeatedly released and then readmitted to hospital for various treatments.
• In 20XX the Deceased was diagnosed with a terminal condition. As the Deceased did not wish to spend their final days in hospital, they were transferred to their home and palliative care was arranged.
• The Deceased died in 2020.
• The Deceased provided the Beneficiaries with substantial financial support.
Reasons for Decision
1. In this case the Beneficiaries are considered financial dependents of the Deceased for the purpose of section 302-195 of the ITAA 1997. Accordingly, the Beneficiaries are death benefit dependants of the Deceased.
Superannuation death benefits
2. Subsection 995-1(1) of the ITAA 1997 states that the term 'death benefits dependent' has the meaning given by section 302-195 of the ITAA 1997.
3. Subsection 302-195(1) of the ITAA 1997 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.
4. The definition of a death benefits dependant does not stipulate the nature or degree of dependency required to be a dependant of the Deceased person in paragraph 302-195(1)(d) of the ITAA 1997. However, it is generally accepted that this paragraph refers to financial dependence.
5. The determination of financial support is a question of fact. In determining whether a person is a dependant it is necessary to establish the actual level of financial support because dependence is assessed based on the dependence or reliance on the earnings of another person for support.
6. The definition of dependency was addressed and interpreted in the High Court case of Kauri Timber Co (Tas) Pty Ltd v Reeman (1973) 47 ALIR 184; Gibbs J in speaking to 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.
7. Where the financial level of support provided to a person is substantial then that person can be regarded as financially dependent. If the level of financial support is insignificant or minor, then the person cannot be characterised as a dependant.
8. In the matter of Re Malek v. Federal Commissioner of Taxation  AATA 678 Senior Member Pascoe clarified financial dependence:
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 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.
9. In Malek the evidence provided by the applicant was able to demonstrate that the financial support received from her Deceased son had been significant. The son accepted responsibility for mortgage repayments, maintenance and other expenses related to the applicant's residential premises.
10. In this case, the Beneficiaries provided sufficient evidence to show that they were financially dependent on the Deceased. As in Malek's case, the Deceased accepted responsibility for the Beneficiaries expenses, such as purchasing cars, assisting with financial support for renovations, contributing towards the cost of surgery, assisting with loans, paying for holidays, paying trust distributions, and paying for groceries, utilities, food, entertainment and car related expenses.
11. Accordingly, we are satisfied that in this case the Beneficiaries were financially dependent on the Deceased at the time of death for the purpose of paragraph 302-195(1)(d) of the ITAA 1997.