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Edited version of private advice

Authorisation Number: 1052031797952

Date of advice: 13 September 2022

Ruling

Subject: Superannuation death benefit - financial dependency

Question

Are you a 'death benefits dependant' of the Deceased in accordance with section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997), due to being a financial dependent of the Deceased just before he died?

Answer

Yes.

This ruling applies for the following period:

1 July 20XX to 30 June 20XX

Relevant facts and circumstances

You are the adult child of the Deceased aged over 18 years at the time of the Deceased's death and the Beneficiary of his Estate.

You and the Deceased did not live together.

The Deceased provided extensive financial support to you and your family.

You are a signatory of the Deceased's bank account.

You would help with the day to day financial affairs including bill payments, money transfers etc.

You had a close relationship with the Deceased as co-dependant you relied upon each other. You would look out for each other with ongoing contact, lending a car, collecting mail, checking house security, signatory on the bank account and picking up from the hospital day surgery.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 995-1

Income Tax Assessment Act 1997 section 302-195

Income Tax Assessment Act 1997 section 302-65

Reasons for decision

Superannuation death benefits

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.

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.

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.

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.

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.

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.

In the matter of Re Malek v. Federal Commissioner of Taxation [1999] 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.

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.

In this case, you provided sufficient evidence to show that you were financially dependent on the Deceased. As in Malek's case, the Deceased accepted responsibility for your expenses, such as mortgage repayments and contributing to your family expenses.

Accordingly, we are satisfied that in this case you were financially dependent on the Deceased at the time of death for the purpose of paragraph 302-195(1)(d) of the ITAA 1997.