ATO Interpretative Decision

ATO ID 2005/173 (Withdrawn)

Income Tax

Family Trust Election: definition of family - step-child
FOI status: may be released

This ATO ID is withdrawn as the new subsection 272-95(2) of Schedule 2F to the Income Tax Assessment Act 1936 provides that after 1 July 2007, a person does not cease to be a family member merely because of the death of any other family member. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of the membership of the test individual's family before 1 July 2007.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Will the step-child of a test individual remain a member of the test individual's family pursuant to section 272-95 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) after the test individual's spouse dies?

Decision

No. The child will cease to be the step-child of the test individual after the death of the test individual's spouse.

Facts

A trustee of a trust has made a family trust election pursuant to section 272-80 of Schedule 2F to the ITAA 1936 which is in force and has specified X as the test individual.

X's spouse has a child, Y, from a previous relationship, X's step-child. Since making the family trust election, X's spouse has died.

X has not formally adopted the child under any state or territory adoption law.

Reasons for Decision

As defined by section 272-95 of Schedule 2F to the ITAA 1936 the family of the test individual includes the child of the test individual.

'Child' is defined in subsection 6(1) of the ITAA 1936 as:

...in relation to a person, includes an adopted child, a step-child or an ex-nuptial child of that person.

The term 'step-child' is not defined in the ITAA 1936 or the Income Tax Assessment Act 1997. The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Ltd Pty, NSW defines step-child as:

a child of a husband or wife by a former marriage

The definition of 'step-child' was considered in IR Commrs v. AB Russell (1955) 36 TC 83 to mean a son or daughter by a former marriage of the husband or wife even though the real parent may still be alive.

These definitions do not consider the situation where the spouse of the step-parent dies.

Andrews CJ in Re Burt (1988) 1 Qd R 23 at 24 considers the situation in the following statement:

I am satisfied that the relationship of affinity between step-parent and stepchild which comes into being with the marriage of the child's natural parent with the step-parent depends for its continued existence upon the continuity of that marriage and that it ceases with the termination of that marriage whether by death or divorce.

Consequently, Y is not considered to be the 'step-child' of the test individual. Further, as Y ceases to be a 'child' as defined by subsection 6(1) of the ITAA 1936, Y is not a member of the test individual's family for the purposes of section 272-95 of Schedule 2F to the ITAA 1936.

Date of decision: 16 May 2005

Year of income: Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1936
   subsection 6(1)
   Schedule 2F
   section 272-80
   section 272-90
   section 272-95

Case References:
IR Commrs v. AB Russell
(1955) 36 TC 83

Re Burt
(1988) 1 Qd R 23

Other References:
The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Ltd Pty, NSW

Keywords
Family group
Family trust election
Family trusts
Step children
Test individual

Business Line: Losses and Capital Gains Tax Centre of Expertise

Date of publication: 24 June 2005

ISSN: 1445-2782

history

	Date:	Version:
	16 May 2005	Original statement
You are here	12 October 2007	Archived

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