Edited version of private advice

Authorisation Number: 1051924616376

Date of advice: 30 November 2021

Ruling

Subject: Superannuation death benefit - dependant status of a former spouse

Question 1

Is the beneficiary a death benefits dependant of the deceased according to section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997?

Answer:

Yes

Question 2

Is the superannuation lump sum death benefit received by the beneficiary during the 20XX-XX income year excluded from assessable income under section 302-60 of the ITAA 1997?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

1. The Deceased died during the 20XX-XX income year.

2. The beneficiary married the deceased.

3. The deceased and the beneficiary ceased living together at later time.

4. The deceased was member of a complying superannuation fund (the fund) at the time of their death.

5. The beneficiary lodged a claim for death benefit with the fund in the capacity of a former spouse of the deceased.

6. The fund determined that the full amount of the death benefit be paid to the beneficiary as a dependent

No tax had been withheld from the paid benefit.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 302

Income Tax Assessment Act 1997 section 302-45

Income Tax Assessment Act 1997 section 302-60

Income Tax Assessment Act 1997 section 302-195

Income Tax Assessment Act 1997 section 307-5

Income Tax Assessment Act 1997 section 307-65

Income Tax Assessment Act 1997 section 995-1

ATO Interpretative Decision 2011/83

Reasons for decision

Summary

1.               As a former spouse of the deceased, the beneficiary is a 'death benefit dependant' as defined under section 302-195 of the ITAA 1997.

2.               Consequently, the taxable component of the superannuation lump sum death benefit paid to the beneficiary is not assessable income or exempt income, as per section 302-60 of the ITAA 1997.

Detailed reasoning

Meaning of death benefits dependant

3.               Division 302 of the ITAA 1997 sets out the taxation arrangements that apply to the payment of superannuation death benefits. These arrangements depend on whether the person that receives the superannuation death benefit is a dependant of the deceased and whether the amount is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit.

4.               A superannuation death benefit is defined in section 307-5 of the ITAA 1997 as:

A payment to you from a superannuation fund, after another person's death, because the other person was a fund member.

5.               A superannuation lump sum is described in section 307-65 of the ITAA 1997 as a superannuation benefit that is not a superannuation income stream, as defined in section 307-70 of the ITAA 1997.

6.               Where a person who was a dependant of the deceased receives a superannuation death benefit paid as a lump sum, the death benefit is not assessable income and is not exempt income, under section 302-60 of the ITAA 1997.

7.               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. 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.

8.               The term 'spouse' is defined in subsection 995-1 of the ITAA 1997 as:

Spouse of an individual includes:

e)     another individual (whether of the same sex or a different sex) with whom the individual is in a relationship that is registered under a State law or Territory law prescribed for the purposes of section 2E of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section, and

9.               another individual who, although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple. The meaning of 'former spouse' is explained in ATO Interpretative Decision 2011/83.

10.            In the context of paragraph 302-195(1)(a) of the ITAA 1997, an individual is a deceased person's 'former spouse' if that individual was the spouse of the deceased sometime in the past.

11.            The beneficiary had been a spouse of the deceased in the past as evidenced by the provided Marriage Certificate.

12.            Accordingly, the beneficiary is a 'former spouse' of the deceased for the purpose of paragraph 302-195(1)(a) of the ITAA 1997 and consequently a 'death benefits dependant' pursuant to section 302-195 of the ITAA 1997.

Conclusion

13.            The beneficiary is a 'former spouse' of the deceased for the purposes of paragraph 302-195(1)(a) of the ITAA 1997 and consequently a 'death benefits dependant' as defined under section 302-195 of the ITAA 1997.

14.            The superannuation death benefit lump sum paid to the beneficiary as a dependant of the deceased, is not assessable income and not exempt income, under section 302-60 of the ITAA 1997.

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