5010109565364 | Legal database

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Edited version of private advice

Authorisation Number: 5010109565364

Date of advice: 04 June 2025

Ruling

Subject: Superannuation death benefits dependant - financial dependency

Question 1

Is xx (the Beneficiary 1) a death benefits dependant of xx (the Deceased) according to section 302-195(1)(d) of the Income Tax Assessment Act 1997 (ITAA 1997), due to being a person who was a dependent of the Deceased just before they died?

Question 2:

Is xx (Beneficiary 2) a death benefits dependant of xx (the Deceased) according to section 302-195(1)(d) of the Income Tax Assessment Act 1997 (ITAA 1997), due to being a person who was a dependent of the Deceased just before they died?

Answer 1:

No.

Answer 2:

No.

This private ruling applies for the following period:

Income year ending 30 June 20xx 30 June 20xx

The scheme commences on:

The scheme commences on 1 July 20xx

Relevant facts and circumstances

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

1. Beneficiary 1 (xx) and Beneficiary 2 (xx) (collectively, "the Beneficiaries") are the adult children of xx (the Deceased person) as indicated in the Will of xx dated xx.

2. The Deceased died on xx, as indicated on the death certificate of the Deceased, dated xx.

3. Beneficiary 1 was born on xx and Beneficiary 2 was born on xx. Both Beneficiaries were therefore older than X years when the Deceased died.

4. The Beneficiaries are named in the Deceased's Will, dated xx, as the Beneficiaries of the balance of the estate once debts, funeral and testamentary expenses are paid for.

5. The Deceased's estate received death benefit payments from xx on xx. No tax was withheld from the payment, confirmed on the withdrawal confirmation dated xx.

6. You applied for a private ruling on xx.

7. In support of your application, you made the following statements:

i. The deceased was a xx man who financially assisted his daughters by providing them with secure homes at nominal rent and paid for services such as water.

ii. Beneficiary 1 lived in a property owned by the Deceased (xx).

iii. Beneficiary 2 lived in a property owned by the Deceased (xx).

iv. The Deceased provided the Beneficiaries with reduced rent accommodation, payment of some utilities and occasional groceries.

v. The Deceased provided the Beneficiaries with cash on a regular basis to help cover costs.

8. You summarised the support and care provided to the Deceased by the Beneficiaries as follows:

1. Beneficiary 1:

i. Moved into one of the Deceased's rental properties xx in xx.

ii. Paid market rent of $xx per week from xx.

iii. The rent was reduced to $xx in xx.

iv. The rent was reduced to $xx in xx.

v. Rent was paid in cash and no formal rental agreement was made.

vi. The Beneficiary 1 has had employment for xx years.

vii. The Beneficiary 2 has received xx for at least xx years.

viii. The Deceased paid rates, water, insurance and Strata fees.

2. Beneficiary 2:

i. Moved into one of the Deceased's rental properties xx in xx.

ii. Paid reduced rent of $xx per week.

iii. The Beneficiary received xx for an unstated period and had some employment since xx.

iv. Moved out of xx in xx.

v. Moved to the Deceased's granny flat adjoined to his home in xx.

vi. No rent was paid by the Beneficiary, and the Deceased paid for utility bills and property maintenance.

vii. No formal rental agreement was made, but a xx rental statement was signed by the Deceased in xx.

viii. The Beneficiary moved into xx.

ix. Paid normal rent of $xx per week until xx, when the rent was reduced to $xx.

x. The Deceased assisted the Beneficiary with some medical, travel and shopping money throughout the years.

xi. The Beneficiary assisted the Deceased with xx and mutual xx. During these trips the Deceased would assist the Beneficiary by purchasing some of the Beneficiary's xx, worth $xx per fortnight. This arrangement persisted until the Deceased passed away.

xii. The Deceased began providing $xx per week back to the Beneficiary in cash to assist with regular living expenses.

xiii. The Deceased provided the Beneficiary's xx with a $xx loan for xx in xx.

xiv. The Deceased provided a loan to the Beneficiary with $xx in xx to purchase a xx, but this loan was not repaid.

xv. Beneficiary 2 stated the Deceased would purchase a meal for both Beneficiary 1 and Beneficiary 2 at a value of $xx per month during a regular xx.

9. You provided the following documentation in support of your application:

i. Rental appraisal of units xx and xx number xx dated xx stating each unit is worth $xx per week.

ii. The Deceased's last Will and Testament, dated xx.

iii. The Deceased's Death Certificate, dated xx.

iv. The Probate, dated xx.

v. A Deceased estate superannuation payment letter, withdrawal notification and PAYG summary for the superannuation lump sum payment year ending xx, dated xx.

a. Total Tax Withheld $xx.

b. Taxed element $xx.

c. Untaxed element $xx.

d. Tax free component $xx.

e. Death benefit Y.

vi. A Deceased estate superannuation payment letter, withdrawal notification and PAYG summary for the superannuation lump sum payment year ending xx, dated xx.

a. Total Tax Withheld $xx.

b. Taxed element $xx.

c. Untaxed element $xx.

d. Tax free component $xx.

e. Death benefit xx, trustee of deceased estate.

vii. A transaction record without identifying features for xx to xx.

viii. An xx Binding Death Benefit nomination form for the xx nominating Beneficiary 1 and Beneficiary 2 at xx% share each, dated xx.

ix. A Subdivision of xx on xx for xx dated xx advising that Lot xx was split into Lot xx xx (house) and Lot xx- xx.

x. xx bank statements for the xx:

a. xx through xx showing a handwritten note regarding a withdrawal of $xx on xx 'xx.

b. xx through xx.

c. xx through xx.

d. xx through xx.

e. xx through xx showing a xx payment of $xx with a handwritten note 'xx' on xx.

f. xx - xx, with handwritten notes beside xx payments on xx 'xx'.

g. xx through xx.

h. xx through xx.

i. A transaction record with no account name for xx through xx.

j. A List of Transactions for xx for xx through xx.

xi. xx bank statements for the Deceased's 'xx' account:

a. xx through xx,

b. xx through xx with two cheques and a handwritten note as being 'xx' on xx.

c. xx through xx.

d. xx through xx.

e. xx through xx.

f. xx through xx.

g. xx through xx.

h. xx through xx.

i. xx through xx.

j. xx through xx.

k. xx through xx.

l. xx through xx.

m. xx through xx.

n. a transaction record for xx through xx.

xii. xx bank statements for the Deceased's xx account:

a. xx through xx showing three xx payments on xx with two stated as being Beneficiary 1 and Beneficiary 2, and

b. xx through xx.

xiii. A page from a xx bank account without any identifying features with a handwritten note regarding a xx payment on xx (no year) 'xx'.

10. Beneficiary 1 provided the following documentation in support of the application:

i. Six pay slips for Beneficiary 1 for the xx income year from xx, totalling $xx with an annual salary of $xx.

ii. Income statements for Beneficiary 1 for the income years ending 30 June:

a. xx - Gross payments of $xx

b. xx - Gross payments of $xx.

c. xx - Gross payments of $xx.

d. xx - Gross payments of $xx.

e. xx - Gross payments of $xx.

f. xx - Gross payments of $xx.

iii. A xx bank transaction record for xx for the period xx through xx.

iv. xx invoices for xx dated:

a. xx.

b. xx.

c. xx.

v. Payslips provided show Beneficiary 1 received other income from xx.

11. Beneficiary 2 provided the following documentation in support of the application:

i. xx medical certificate information for Beneficiary 2 for xx, xx and xx requested xx.

ii. A xx job history web page print out for Beneficiary 2 showing they worked at xx between xx and xx, and includes other employment in prior years.

iii. xx bank statements for the xx account for all periods between xx through xx.

a. A payment on xx for the xx through xx period contains a handwritten note on the document as a credit for 'xx'. (Handwritten note not shown on originals.)

b. For the period xx through xx a deposit of $xx is shown with a handwritten note on xx regarding the Deceased's withdrawal of $xx.

(Handwritten note not shown on originals.)

iv. Tax return information for Beneficiary 2 for the income years ending 30 June:

a. xx - taxable income of $xx.

b. xx - taxable income of $xx.

c. xx - taxable income of $xx.

d. xx - taxable income of $xx.

e. xx - taxable income of $xx.

v. Water invoices for xx dated:

a. xx.

b. xx.

c. xx.

vi. Income statements provided show Beneficiary 2 received xx payments for the xx income year.

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)

Income Tax Assessment (1997 Act) Regulations 2021 section 302-200.01

Income Tax Assessment (1997 Act) Regulations 2021 section 302-200.02

Our commitments to you

For information about our commitments to you and what we ask of you, go to ato.gov.au/atocharter

Yours sincerely,

Reason for decision

Question 1:

Question 2:

Summary:

The Beneficiaries (1 and 2) were not persons who were dependents of the Deceased just before they died. Paragraph 302-195(1)(d) of the ITAA 1997 is not satisfied therefore, the Beneficiaries are not a death benefits dependents of the Deceased.

Consequently, the taxable component of the superannuation lump sum death benefit paid to the Beneficiary is assessable income, taxed under section 302-145 of the ITAA 1997

Detailed reasoning

Meaning of death benefits dependant

1. 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.

2. As the Beneficiaries are the adult children of the Deceased, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 are not applicable.

3. As the Beneficiaries did not live with the Deceased in the period leading up to the Deceased's death, the requirements of paragraph 302-195(c) of the ITAA 1997 (interdependency relationship) cannot be satisfied.

4. Therefore, it is necessary to consider paragraph 302-195(1)(d) of the ITAA 1997 - whether the Beneficiaries were 'dependants' of the Deceased just before they died.

5. The definition of 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.

6. There are a number of case law decisions that specify what is required to establish financial dependency. Specifically, the definition of dependency was addressed and interpreted in the High Court case of Kauri Timber Co (Tasmania) 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 that it is the actual fact of dependence or reliance on the earnings of another for support that is the test.

7. This was also reflected in Edwards v Postsuper Pty Ltd [2007] FCAFC 83 where the Full Court of the Federal Court agreed with the Tribunal that while the deceased provided many gifts to his family, it did not consider that would make the appellants and their family financially dependent on the deceased.

8. Senior Member Pascoe in Re Malek v Federal Commissioner of Taxation [1999] AATA 678 in providing his view on the meaning of dependence stated:

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.

9. Case law provides that the question of dependency is governed by factual and not by theoretical considerations. As such the Commissioner does need objective evidence to demonstrate substantial regular and continuous financial support and how the applicant was reliant on the amounts provided.

10. The Beneficiaries have advised that much of the financial assistance provided by the Deceased was in the form of cash. As such, there is little in the way of evidence which can be provided.

11. Limited evidence has been provided in regard to bank transfers.

i. The xx through xx statement for xx bank account with the xx shows a single payment of $xx to Beneficiary 2 on xx, and

ii. inbound bank transfer of $xx on xx is shown on the xx bank account during the statement period xx through xx.

It is also noted that this payment relates to a period over x years prior to the Deceased's passing.

12. Other evidence provided of financial support:

i. xx payments with handwritten notes dated xx, stating the payments were made for Beneficiary 1 and Beneficiary 2 and another xx.

ii. Another xx payment was made on xx with a handwritten note stating 'xx and xx'.

iii. A third payment made by cheque was provided for xx with a handwritten note as 'xx and xx'.

13. No further evidence has been provided of any financial support in the period immediately leading up to the Deceased's passing.

14. No evidence has been provided to show that the Deceased provided financial support to assist the Beneficiaries to meet normal living expenses (such as groceries, mortgage/rent, transportation costs, utility bills, medical expenses).

15. The Commissioner cannot be satisfied that the Beneficiaries were persons who were wholly or substantially reliant on regular and continuous financial support from the Deceased for their ordinary living expenses.

16. There is insufficient evidence to prove that the Beneficiaries were financially dependent on the Deceased and therefore, paragraph 302-195(1)(d) of the ITAA 1997 is not applicable.

Conclusion:

1. Based on the evidence provided, the Commissioner is not satisfied that the Beneficiaries were persons who were substantially reliant on regular and continuous financial support from the Deceased for their ordinary living expenses.

2. As a result, paragraph 302-195(1)(d) of the ITAA 1997 is not satisfied, and the Beneficiaries are not death benefits dependants of the Deceased.

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