Edited version of private advice

Authorisation Number: 1052345219783

Date of advice: 20 January 2025

Ruling

Subject: Superannuation - death benefits dependant

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), due to being a dependent of the deceased just before they died?

Answer: 1

No.

This ruling applies for the following period:

Income year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances:

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

•                The deceased was the parent of the beneficiary.

•                The deceased died in May 20XX.

•                The beneficiary was born in 19XX and was therefore older than 18 years when the Deceased died.

•                On 1 December 20XX, the beneficiary received a death benefit payment from the deceased's superannuation fund with tax withheld of $XX,XXX and a taxed element of $XXX,XXX.

•                The beneficiary stated that they attended college at the University of XXXXXX from 20XX to 20XX, and that, while they lived on the campus, they often stayed with the deceased during this time.

•                The beneficiary also stated that the deceased and the beneficiary's parent were separated during the above period and that their parent lived in XXXXXX, meaning they would have been unable to study without the support of the deceased.

•                The following statements have been made to support that the beneficiary was financially dependent on the deceased:

•                The beneficiary relied upon the deceased's financial support because their parent was self-employed, with substantial business expenses.

•                The beneficiary never received any welfare benefits/Centrelink payments.

•                The deceased provided meals, food, shelter, money for lunches, and assistance with transport costs during their university days in X from 20XX to 20XX.

•                The deceased provided the beneficiary with assistance via transfers, and also cash.

•                The beneficiary would often visit, and stay with, their parent during their college days.

•                The beneficiary provided documentation in the form of handwritten diary entries from their parent for the period of January-May 20XX, referring to transfers to be made to the beneficiary.

•                In response to requests for further information, the following documentation was provided:

•                Death certificate of the deceased showing date of death as between 21 May 20XX and 25 May 20XX.

•                XXXXXX PAYG payment summary - superannuation lump sum, showing payment of the deceased's superannuation entitlements to the beneficiary on 1 December 20XX, with tax of $XX,XXX (X% of the taxed element of $XXX,XXX) withheld.

•                1-page excerpt from an unidentified bank account (Account Number XXXX-XXXX) for the period 26 August 20XX to 2 September 20XX, showing the following relevant deposits:

XX August 20XX - $XX (Notation: Payment from XXXXXX)

XX August 20XX - $XX (Notation: Payment from XXXXXX)

XX August 20XX - $XX (Notation: Payment from XXXXXX)

XX September 20XX - $XX (Notation: Payment from XXXXXX)

Relevant legislative provisions:

Income Tax Assessment Act 1997 section 302-145

Income Tax Assessment Act 1997 section 302-195

Income Tax Assessment Act 1997 section 302-200

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

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

Reasons for decision:

Summary:

The beneficiary was not a dependent of the deceased just before they died. Paragraph 302-195(1)(d) of the ITAA 1997 is not satisfied and therefore, the beneficiary is not a death benefits dependant of the deceased.

Detailed reasoning

Meaning of 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. 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.

As the beneficiary is the adult child of the deceased, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 are not applicable.

As the beneficiary 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.

Therefore, it is necessary to consider paragraph 302-195(1)(d) of the ITAA 1997 - whether the beneficiary was a 'dependant' of the deceased just before they died.

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.

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.

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 their family, it did not consider that would make the appellants and their family financially dependent on the deceased.

Senior Member Pascoe in Re Malek v Federal Commissioner of Taxation [1999] AATA 678 in providing their 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.

The beneficiary has 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.

Limited evidence has been provided in regard to bank transfers. The XXX statement excerpt (which doesn't provide an account name/owner) shows a single payment of $X,XXX. Additionally, the excerpt provided shows evidence of payments made by the beneficiary's parent, totalling more than $XXX for that period, calling further into question whether the beneficiary was reliant on the deceased financially.

It is also noted that this excerpt relates to a period almost two years prior to the deceased's passing. No evidence has been provided of any financial support in the period immediately leading up to that passing.

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

The Commissioner cannot be satisfied that the beneficiary was a person who was wholly or substantially reliant on regular and continuous financial support from the deceased for their ordinary living expenses.

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

Conclusion:

Based on the evidence provided, the Commissioner is not satisfied that the beneficiary was a person who was substantially reliant on regular and continuous financial support from the deceased for their ordinary living expenses.

As a result, paragraph 302-195(1)(d) of the ITAA 1997 is not satisfied, and the beneficiary is not a death benefits dependant of the deceased.