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Edited version of private advice

Authorisation Number: 1012678630027

Ruling

Subject: Superannuation death benefit lump sum - dependant

Questions

1. Will a former same sex spouse qualify as a 'dependant' for the purposes of the Income Tax Assessment Act 1997 (ITAA 1997)?

2. Will the former same sex spouse of the deceased qualify as a 'death benefits dependant' under section 302-195 of the ITAA 1997?

3. Will the death benefit paid by the trustee corporation to the deceased estate be not assessable income and not exempt income?

Answers

1. Yes

2. Yes

3. Yes

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 20XX

Relevant facts and circumstances

The deceased passed away in the 20XX income year.

The Beneficiary is the sole executor and beneficiary of the deceased estate.

The Beneficiary is also the trustee for the deceased estate.

The Beneficiary was in a same sex relationship with the deceased.

The deceased and the Beneficiary purchased a property under a joint mortgage and lived there from the 200X income year until the 200Y income year.

The Beneficiary received permanent residency in the 200Z income year under an interdependent relationship visa application, after providing evidence of the ongoing relationship between the Beneficiary and the deceased.

The Beneficiary separated with the deceased in the 200Y income year. The Beneficiary then signed a separation agreement with the deceased outlining how they were to divide their joint assets.

During the relevant income year, the deceased estate received the superannuation lump sum payments from a trustee corporation.

As the Beneficiary is the sole beneficiary of the deceased estate, the superannuation lump sum payment received by the deceased estate would be transferred to the Beneficiary.

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 302-200

Income Tax Assessment Act 1997 Subsection 302-200(1)

Income Tax Assessment Act 1997 Subsection 302-200(2)

Income Tax Assessment Act 1997 Subsection 302-200(3)

Superannuation Industry (Supervision) Act 1993 section 10

Reasons for decision

Summary

The Beneficiary as the former spouse of the deceased is considered a death benefit dependent. The death benefit superannuation payment that the Beneficiary received is therefore not assessable and not exempt income.

Detailed reasoning

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. Section 302-195 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.

With regards to same sex relationships, the definition of spouse in section 995-1 of the ITAA 1997 was amended to recognise same sex relationships. Furthermore, under section 10 of the Superannuation Industry (Supervision) Act 1993, the spouse of a person now includes:

The application of the law to same sex relationships is further explained in ATO Interpretative Decision 2011/83, which states that the legislature has not put any constraints on the period to which the new definition of 'spouse' operates. This means that in determining whether an individual is a 'former spouse', the legislature permits that a conclusion be formed based upon the facts relating to events that occurred prior to the operation of the amended definition of 'spouse'.

In this case, the Beneficiary had previously been in a same sex relationship with the deceased, they lived together and the couple was considered interdependent. The Beneficiary can be therefore be considered as the former spouse of the deceased. This satisfies subsection 302-195(a) of the ITAA 1997, which means the Beneficiary is a death benefits dependant.

Taxation of death benefit superannuation payment

According to section 302-60 of the ITAA 1997, lump sum death benefits made to dependants are not assessable and not exempt income. During the relevant income year, the Beneficiary as sole beneficiary of the deceased estate received a lump sum superannuation death benefit. As the Beneficiary is considered a death dependant of the deceased, the lump sum superannuation death benefits that they received is not assessable income and not exempt income.

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