Edited version of private advice

Authorisation Number: 1052403508367

Date of advice: 17 June 2025

Ruling

Subject: Death benefits dependant - financial dependency

Question 1

Is the Applicant 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 person who was a dependant of the Deceased just before he died?

Answer

No.

Question 2

Are the superannuation lump sum death benefits received by the Applicant during the 202X income year excluded from their assessable income under section 302-60 of the ITAA 1997?

Answer

No.

This private ruling applies for the following period

•         Financial year ending 30 June 202X

•         Financial year ending 30 June 202X

The scheme commenced on:

1 July 2023

Relevant facts and circumstances

The Applicant is the adult child of the Deceased.

The Deceased died between XX XX 202X and X XX 202X (Date of Death).

The Applicant was older than 18 years when the Deceased died.

The Applicant is the legal representative of the Estate of the Deceased (the Estate).

On XX XX 202X, the Applicant applied for a private ruling (the Application).

In support of the Application, the Applicant provided a letter dated X XX 202X, addressed to him, from the super fund (the Fund), advising of the proposal to pay a benefit of $XX,XXX.XX to the Applicant as the Legal Personal Representative (LPR) of the Deceased.

The letter further advises the Deceased is survived by four adult children and the Fund has not identified any person who was financially dependent on the member at the time of death.

The Applicant made the following statements in the Application, to support the contention that the Applicant was financially dependent on the Deceased:

•         The Deceased financially supported the Applicant from the time he was a child, up until the time of his (the Deceased's) death

•         Whenever they met over the last ten years (typically a few times a year), the Deceased gave the Applicant money to help pay for bills, food and petrol

•         The amounts given varied, from as low as $XXX to as high as $X,XXX

•         The Deceased once paid for a year-long gym membership for the Applicant

•         The Applicant relied on the Deceased's financial support in order to stay on top of bills and afford his housing

•         Without that support, there were multiple times the Applicant would have been unable to pay bills, and pay for food, et cetera

The Applicant further advised:

•         He cannot provide any proof of the purported financial support, as the Deceased used cash wherever possible

•         The Deceased never transferred any money to the Applicant

The Applicant later provided a (signed, but undated and unwitnessed) Statutory Declaration (the Declaration), stating that over a period of nearly two years the Deceased gave them $X,XXX in cash for various purposes.

Following a request for further information, the Applicant provided bank statements of the Deceased for the period of one year prior to the Date of Death.

The Applicant also provided:

•         Death Certificate of the Deceased

•         Grant of Probate and Letters of Administration

•         Transaction banking listing showing payment of $XX,XXX.XX on XX XX 202XX to the Estate, which the Applicant stated was divided equally between the Applicant, and each of his three brothers.

Bank statements for the Applicant were requested, but none were provided.

A copy of the document 'PAYG payment summary - superannuation lump sum' was also requested, but not provided.

Income of Applicant

Based on ATO-held information, the Applicant's income in recent years predominantly came from their employment.

The Applicant reported the following taxable income in recent years:

•         202X-2X- $XX,XXX

•         202X-2X - $XX,XXX

The Applicant's income tax return for the 202X-2X income year included rental income of $X,XXX from a 3-bedroom property.

Income of Deceased

The Deceased last lodged an income tax return for the 201X-1X income year.

The Deceased's provided bank statements show no income received from X XX 202X to XX XX 202X inclusive.

Centrelink pension (carer) payments were received from XX XX 202X until XX XX 202X (last payment confirmed to have been paid before the Date of Death), totalling $XX,XXX.XX.

On X XX 202X, the Deceased received two cash payments of $X,XXX and $X,XXX, resulting in total income (according to the provided bank statements) of $XX,XXX.XX for the above period.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 302-60

Income Tax Assessment Act 1997 Section 302-145

Income Tax Assessment Act 1997 Section 302-195

Reasons for decision

Question 1:

Is the Applicant 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 person who was a dependant of the Deceased just before he died?

Question 2:

Are the superannuation lump sum death benefits received by the Applicant during the 202X income year excluded from their assessable income under section 302-60 of the ITAA 1997?

Summary

The Applicant was not a person who was a dependant of the Deceased just before the Deceased died. Paragraph 302-195(1)(d) of the ITAA 1997 is not satisfied, therefore the Applicant is not a death benefits dependant of the Deceased.

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

Detailed reasoning

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 of the person who has died as:

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

As the Applicant did not live with the Deceased in the period leading up to the Deceased's death, the requirements of paragraph 302-195(1)(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 Applicant was a 'dependant' of the Deceased just before he 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.

The Macquarie Dictionary defines 'dependant' as a person to whom one contributes all or a major amount of necessary financial support.

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 (Kauri Timber); Gibbs J in speaking to previous cases on the issue of dependency stated that:

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

That dependency involves more than the mere receipt of support, but also reliance on it, was affirmed by Hamilton J in Griffiths v Westernhagen [2008] NSWSC 851:

For a relationship of dependency to be established there must be more than the mere giving of money. Rather there must be a relationship where one party relied on the other for what is required for their ordinary living.

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.

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

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

In the matter of Malek the Tribunal made reference to the earlier authority of Simmons v White (1899) 1 QB 1005 and the statement from Romer LJ who stated that dependants:

must be dependants in the proper sense of the work, and not merely persons who derive a benefit from the earnings of the deceased.

Further, in Malek, the evidence provided demonstrated that the deceased was responsible for the mortgage repayments, maintenance and other expenses of the residence in which both the deceased and the dependant lived. The Tribunal considered that the amounts provided by the deceased was significant.

In the case of Confidential v Deputy Commissioner of Taxation [2000] AATA 8 Senior Member Fayle stated:

The ITAA 1936 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.

In that particular case the Tribunal found that, at the relevant time, the applicant's financial support came primarily and principally from the husband's employment rather than from the deceased.

The Federal Court upheld a decision of the Superannuation Complaints Tribunal in Harris v Trustee Commonwealth Superannuation Scheme (2006) 151 FCR 169 that a separated spouse was not wholly or substantially dependent on a deceased member for the purpose of receiving a superannuation benefit. In that case the separated spouse had an annual income of $26,000 and received $100 per fortnight from her separated husband at the time of his death. The Federal Court agreed that a finding that this level of support did not amount to substantial financial dependency was fair and reasonable.

The decision in Kauri Timber 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.

Application

The Applicant has advised that the financial support provided by the Deceased was in the form of cash.

As such, the Deceased's bank statements show no evidence of any financial support being provided to the Applicant, let alone a level of support which is considered necessary for the Applicant to meet normal living expenses (such as groceries, mortgage/rent, transportation costs, utility bills, medical expenses), and which would constitute financial dependency.

There is no evidence to support the Applicant's claims of the various, semi-regular payments purported to have been made to him by the Deceased.

The provided Declaration is not valid, as it has not been dated, nor witnessed. Even had it been so, the amounts referred to in that document total only $X,XXX.

Given the level of the Applicant's income from other sources, including employment and rental income, such an amount, even were it verified, would not come close to constituting financial dependency.

The Applicant had sufficient income to support themselves financially and was not financially dependent on the Deceased to pay for their ordinary living expenses. For financial dependency to be established, there must be more than the mere giving of money - there must be a relationship where one party relies on the other for what is required for their ordinary living.

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

Conclusion

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

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

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