Definition of dependant ‘evolving’
In light of a recent Interpretive Decision by the ATO, one industry lawyer has said the definition of a dependant for superannuation benefits is “evolving”, which has implications for SMSF practitioners.
Last month, the ATO released Interpretive Decision 2014/22 which confirmed its view that a child who cares for an elderly parent could be a dependant and in an inter-dependant relationship.
Speaking to SMSF Adviser, director of Legacy Law Donal Griffin said the ATO is acknowledging those people who, for example, go back into the family home as an adult to look after a frail parent.
“The tax office is acknowledging that those people who do go back into that situation are worthy of the tax benefits and a worthy recipient of the superannuation of those people,” Mr Griffin said.
“I think it’s because the nature of society is changing. Superannuation law has a particular role to play in the community, being trying to encourage people to fund their retirement for them and their families and not be dependent on the state,” he added.
Mr Griffin said practitioners may need to “broaden the conversation” with their clients in light of these developments.
“[Practitioners should] find out whether any children are living with their clients, or if the client is the child, whether they’ve moved in to help mum or dad out,” Mr Griffin said.
“So it’s quite a change in the type of discussion they would have, and if either of those situations is the case, [practitioners] can suggest to the client that they might want to execute some kind of statutory declaration whereby both sides agree that they feel it is an inter-dependant relationship.”