ATO Interpretative Decision

ATO ID 2014/6

Income Tax

Death benefits dependant - adult child on youth allowance

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is a taxpayer in receipt of Youth Allowance at the time of the death of a parent, a death benefits dependant of the parent for the purpose of section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. On the facts given, the taxpayer is a death benefits dependant of the parent for the purpose of section 302-195 of the ITAA 1997.

Facts

The taxpayer receives a death benefit from the parent's superannuation fund after the parent's death. The taxpayer is over 18 years old at the time, was living at home with the parent until the parent's death and receiving Youth Allowance payments from Centrelink.

Reasons for Decision

The term 'death benefits dependant' is defined in subsection 302-195(1) of the ITAA 1997. Paragraph 302-195(1)(d) states that a death benefits dependant, of a person who has died, is any other person who was a dependant of the deceased person just before he or she died.

Dictionary definitions of 'dependant' make reference to substantial financial support. That dependency involves substantial financial support or maintenance is supported by passages in the Explanatory Memorandum to the Income Tax Assessment Amendment Bill (No.3) 1984 and Explanatory Memorandum for Taxation Laws Amendment Bill (No. 5) 1987.

The determination of financial support is a question of fact. The Youth Allowance payments the taxpayer received were calculated at a lower 'at home' rate as opposed to the higher 'independent' rate. This indicates that the taxpayer was substantially financially dependent. A comparison of the level of financial support provided by the taxpayer's parent with that provided by the Youth Allowance payments also indicates that the taxpayer was financially dependent.

Date of decision:  12 February 2014

Year of income:  2007 - 2008 income year and later income years

Legislative References:
Income Tax Assessment Act 1997
   section 302-195
   subsection 302-195(1)
   paragraph 302-195(1)(d)

Other References:
Explanatory Memorandum for Income Tax Assessment Amendment Bill (No. 3) 1984
Explanatory Memorandum for Taxation Laws Amendment Bill (No. 5) 1987

Keywords
Death benefits dependant
Death benefits - superannuation benefits
Superannuation
Superannuation benefits

Business Line:  Superannuation

Date of publication:  21 February 2014

ISSN: 1445-2782