The beneficiaries applied for a private ruling and provided statements that said that the deceased was a man who financially assisted his daughters by providing them with secure homes at nominal rent and paid for services such as water. Both lived in properties owned by the deceased.

The deceased also provided the beneficiaries with cash regularly to help cover costs.

The statements continued that beneficiary 1 was employed while beneficiary 2 had some employment. Beneficiary 2 also moved out of the unit owned by the deceased and into a granny flat that adjoined his home, where she paid no rent or utilities.

The deceased assisted beneficiary 2 with some medical, travel and shopping money throughout the years. The deceased provided a loan to the beneficiary, but this loan was not repaid.

The beneficiaries provided the Commissioner with other documentation, including the deceased’s death certificate, last will and testament, rental appraisals for the units, superannuation payment letter, and the binding death nomination documentation.

The ruling stated that the beneficiaries were not persons who were dependents of the deceased just before they died, as paragraph 302-195(1)(d) of the Income Tax Assessment Act 1997 was not satisfied.

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

“As the beneficiaries are the adult children of the deceased, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 are not applicable,” the ruling read.

“As the beneficiaries 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.”

It is, therefore, necessary to consider paragraph 302-195(1)(d) of the ITAA 1997, whether the beneficiaries were “dependants” 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.”

“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.

“Case law 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.”

The ruling continued that, as the beneficiaries said that much of the financial assistance provided by the deceased was in the form of cash, there is little in the way of evidence which can be provided.

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

“The Commissioner cannot be satisfied that the beneficiaries were persons who were 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 Beneficiaries were financially dependent on the Deceased and therefore, paragraph 302-195(1)(d) of the ITAA 1997 is not applicable.”