Edited version of your written advice

Authorisation Number: 1012664985262

Ruling

Subject: Death benefits dependant

Question

Was your client a death benefits dependant of the deceased before or at the time of the date of death?

Answer

Yes

This ruling applies for the following periods

Year ended 30 June 2013

The scheme commences on

1 July 2011

Relevant facts and circumstances

The deceased passed away in the relevant income year.

Your client is the child of the deceased. Your client was over 18 years old at the time of death of the deceased.

The deceased paid for your client's rent, food and living expenses while your client attended university.

Your client stayed with the deceased for a period from 20XX until 20YY. Your client resumed their university studies in the relevant income year and travelled between the university and the deceased's residence.

The deceased provided financial support to your client during the time they stayed with the deceased. Your client provided emotional and personal care to the deceased, and assisted with household duties.

Your client was ineligible for any government financial support from Centrelink.

Your client received a small amount of wages in the 2012-13 income year.

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)

Reasons for decision

Summary

Your client was considered to be financially dependent on the deceased at the time of the deceased's death. Therefore they are a dependant of the deceased within the definition of death benefit dependant in section 302-195 of the ITAA 1997.

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.

Interdependency relationship

Under subsection 302-200(1) of the ITAA 1997 an interdependency relationship is defined as:

Two persons (whether or not related by family) have an interdependency relationship under this section if:

(a) they have a close personal relationship; and

(b) they live together; and

(c) one or each of them provides the other with financial support; and

(d) one or each of them provides the other with domestic support and personal care.

Subsection 302-200(2) of the ITAA 1997 states:

In addition, 2 persons (whether or not related by family) also have an interdependency relationship under this section if:

(a) they have a close personal relationship; and

(b) they do not satisfy one or more of the requirements of an interdependency relationship mentioned in paragraphs (1)(b), (c) and (d); and

(c) the reason they do not satisfy those requirements is that either or both of them suffer from a physical, intellectual or psychiatric disability.

In this case, your client did not live with the deceased immediately prior to the time of death. Further, your client and the deceased do not satisfy the requirements under subsection 302-200(2). Accordingly, there was no interdependency relationship between the deceased and your client.

Where an interdependency relationship cannot be established, dependency will need to be established.

Financial dependency

According to the Macquarie Dictionary, one meaning of the term dependant is a person to whom one contributes all or a major amount of necessary financial support.

In the CCH Macquarie Concise Dictionary of Modern Law a dependant is defined as being a person substantially maintained or supported financially by another.

In both dictionary definitions the emphasis is on the fact that the financial support or maintenance is substantial. In determining whether a person is a dependant it is necessary to establish the actual level of financial support that was provided to that person by the deceased. This is because dependence is assessed on the basis of the actual fact of dependence or reliance on the earnings of another for support. This is a question of fact (Aafjes v. Kearney (1976) 180 CLR 199; (1976) 50 ALJR 454; (1976) 8 ALR 455; [1976] WCR (NSW) 18; [1976] HCA 5, Barwick CJ at 456.

In Case (2000) 43 ATR 1273; (2000) 2000 ATC 129; [2000] AATA 8, Senior Member Fayle, in considering the definition of dependant in relation to section 27AAA of the ITAA 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.

Where the level of financial support provided to a person is substantial then that person can be regarded as a dependant. So a financial dependant is considered to be a person to whom another person contributes all or a major amount of necessary financial support. If the level of financial support is insignificant or minor, then the person cannot be regarded as a dependant.

In the Victorian Supreme Court case of Fenton v. Batten [1948] VLR 422; [1949] ALR 69; 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.

These comments made in Fenton v. Batten when read in the context with the facts established in that case, would tend to confirm the definition of dependant contained in the CCH Macquarie Dictionary of Modern law and the meaning quoted above from the Macquarie Dictionary.

In the full High Court case of Kauri Timber Co. (Tas) Pty Ltd v. Reeman (1973) 128 CLR 177; (1973) 47 ALJR 184; [1972-73] ALR 1266; [1973] HCA 8 at CLR 180, Justice Gibbs (as he then was) in speaking of previous cases on the issue of dependency stated that:

The principle underlying these authorities is the actual fact of dependence or reliance on the earnings of another for support that is the test.

Handing down the decision in Re Malek and Commissioner of Taxation (Cth) (1999) 42 ATR 1203, (1999) 99 ATC 2294; [1999] AATA 678 (Malek's Case), 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 Malek's Case, the evidence supplied by the taxpayer was able to demonstrate that the financial support received from her deceased son had been significant. The son had accepted responsibility for mortgage repayments, maintenance and other expenses of the unit in which the taxpayer lived.

Taking into account all of the above, it is considered that financial dependence occurs where a person is wholly or substantially maintained financially by another person. The point to be considered is whether the facts show that a person depended or relied on the earnings of the deceased for their day to day sustenance.

If the financial support provided merely supplements the person's income and represents quality of life payments, then it would not be considered substantial support. What needs to be determined is whether or not the person would be able to meet their daily basic necessities (shelter, food, clothing, etc.) without the additional financial support.

As your client was over 18 years of age at the time of the death of the deceased, the main issue to be considered is whether the facts demonstrate that your client depended or relied on the earnings of the deceased for their day to day sustenance up until the date of death.

In your case, your client relied on the deceased for food, rent and other living expenses while studying at university. These expenses are considered to be daily necessities. In addition, your client was ineligible for government support in the form of Centrelink payments. Furthermore, though your client in the 2013-14 income year received a small amount of income in wages, the amount was not substantial enough to be considered sufficient for their day to day sustenance.

In view of the above, your client was considered to be financially dependent on the deceased at the time of the deceased's death. Therefore your client is a dependant of the deceased within the definition of death benefit dependant in section 302-195 of the ITAA 1997.