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Edited version of your written advice
Authorisation Number: 1051336414360
Date of advice: 8 February 2018
Ruling
Subject: Death benefits dependant
Question
Is a person (the Beneficiary) a death benefits dependant of a person who has died (the Deceased) in accordance with section 302-195 of the Income Tax Assessment Act 1997(ITAA 1997)
Answer
Yes
This ruling applies for the following period
Income year ended 30 June 2016
The scheme commences on:
1 July 2015
Relevant facts and circumstances
The Beneficiary is the child of the Deceased aged over 18.
The Beneficiary was a full-time student and did not reside with the Deceased.
The Beneficiary had a casual job and was not receiving any Centrelink payments.
The Beneficiary’s taxable income for the 2015 income year was an amount.
Prior to their death, the Deceased provided financial support to the Beneficiary by paying for the Beneficiary’s basic necessities. This support included:
● Payment for phone and internet services;
● Payment for car insurance;
● Payment for ambulance cover; and
● Payment for RAA membership.
Bank statements for the Deceased show that many of these payments were made directly to the provider. In addition to the payment of these bills, the Deceased also provided additional cash to the Beneficiary to cover day to day expenses such as fuel and food.
Since the Deceased’s death, the Beneficiary has relied on Centrelink payments to cover their expenses.
The Beneficiary received a payment (the Benefit) from the Deceased’s superannuation fund
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 302-195.
Income Tax Assessment Act 1997 Section 302-200.
Income Tax Assessment Act 1997 Subsection 995-1(1).
Reasons for decision
Summary
The Beneficiary is a ‘death benefits dependant’ of the Deceased because they were a dependant of the Deceased, as defined under section 302-195(1)(d) of the Income Tax Assessment Act 1997 (ITAA 1997), just before the Deceased died.
Detailed Reasoning
Death Benefits Dependant
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 just before he or she died.
*To find definitions of asterisked terms, see the Dictionary, starting at 995-1.
As the Beneficiary is a child of the Deceased aged over 18, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 do not apply. In addition, the Beneficiary was not in an ‘interdependency relationship’ with the Deceased just before the Deceased died. Thus paragraph 302-195(1)(c) does not apply.
Therefore, the Beneficiary must satisfy the ordinary meaning of the word ‘dependant’ if they are to be treated as a death benefits dependant of the Deceased.
Meaning of ‘dependant’
According to the Macquarie Dictionary, a ‘dependant’ is:
1.one who depends on or looks to another for support, favour, etc 2. a person to whom one contributes all or a major amount of necessary financial support.
Butterworth’s Australian Legal Dictionary defines ‘dependant’ as ‘a person who depends on another, wholly or substantially’.
In the Victorian Supreme Court case of Fenton v. Batten [1949] ALR 69; [1948] VLR 422, Justice Fullager made the following comments regarding dependency:
The word dependant is, in a true sense a technical term. If the evidence established that the alleged dependant relied on or relies on another as the source wholly or in part of his or her existence then dependence is established. Questions of scale of living do not enter into the matter in the absence of some such statutory enactment.
In Case [2000] AATA 8, (2000) 43 ATR 1273; 2000 ATC 129, Senior Member Fayle in considering the definition of dependant in relation to section 27AAA of the Income Tax Assessment Act 1936 stated:
The Act is primarily concerned with commercial and financial matters. An Act relating to the imposition assessment and collection of tax upon incomes. As such, a question of dependency should be construed within that context. The relevant question in this sense is whether the applicants were financially dependent on their son at the relevant time.
Handing down the decision in Re Malek v. Federal Commissioner of Taxation Case [1999] AATA 678; (1999) 42 ATR 1203, (1999) 99 ATC 2294, Senior Member Pascoe of the Administrative Appeals Tribunal (AAT) further clarified the meaning of the word dependant, stating:
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 person’s 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 the current case, it is clear that the Deceased provided regular continuous financial support to the Beneficiary. However, what must be shown is that the Beneficiary depended or relied on that support to maintain their normal standard of living at the time of the Deceased’s death.
Assessing the circumstances, it is considered that the Beneficiary did rely on the support provided by the Deceased to maintain their normal standard of living at the time of the Deceased’s death. This view is based on the following:
(a) The Beneficiary is a full-time university student supported by casual employment;
(b) The Deceased directly paid for many the Beneficiary’s basic necessities including food, fuel, health insurance and car insurance;
(c) Since the Deceased’s death, the Beneficiary has relied on Centrelink payments to help meet their expenses.
Consequently, the Beneficiary is a death benefits dependant of the Deceased as defined in section 302-195 of the ITAA 1997.
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