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Edited version of your written advice
Authorisation Number: 1051301726917
Date of advice: 30 October 2017
Ruling
Subject: Death benefits dependency
Question
Are the Beneficiaries ‘death benefits dependants’ of 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 periods:
Income year ended 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
The beneficiaries of the Deceased’s estate (the Beneficiaries) are the parents of the Deceased.
The Deceased had no spouse, partner or children at the time of death.
The Beneficiaries live overseas while the Deceased lived and worked in Australia.
The Deceased provided financial support to the Beneficiaries while employed in Australia.
The Beneficiaries’ only source of income was a monthly pension paid to one of the Beneficiaries.
The Beneficiaries monthly expenses exceed their monthly pension.
The Beneficiaries borrowed an amount each year from a family friend who was repaid by the Deceased on regular visits to see the Beneficiaries. This arrangement continued until the Deceased’s death.
The Deceased was a member of a Superannuation Fund (the Fund).
The trustee for the Deceased’s Estate received a payment of from the Fund.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 302-60
Income Tax Assessment Act 1997 Section 302-140
Income Tax Assessment Act 1997 Section 302-145
Income Tax Assessment Act 1997 Section 302-195
Reasons for decision
Summary
The Beneficiaries are ‘death benefits dependants’ of the Deceased because they were dependants 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
Subsection 302-195(1) of the ITAA 1997 defines a ‘death benefits dependant’ of person who has died as follows:
(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 section 995-1.
As the Beneficiaries are the parents of the Deceased, it must be established that the Beneficiaries were ‘dependants’ of the Deceased just before the Deceased died to meet the definition of a ‘death benefits dependant’.
Financial dependency
In determining whether a person is a ‘dependant’, it is necessary to establish the nature of financial support that was provided to that person by the deceased.
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.
Handing down the decision in Malek v. Federal Commissioner of Taxation [1999] AATA 678, 42 ATR 1203, 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 persons 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.
As the Beneficiaries received only one source of income, which was insufficient to live off, they relied on the Deceased to meet their basic living expenses.
The Beneficiaries were reliant on the regular continuous contributions from the Deceased to maintain their normal standard of living.
Therefore, the Beneficiaries are considered to have satisfied the requirements of section 302-195(1)(d) of the ITAA 1997 and are ‘death benefits dependants’ of the Deceased.