For superannuation death benefits, a dependant includes a spouse, child under 18, financial dependant, or someone in an interdependency relationship with the deceased. Tax dependants receive super death benefits tax-free.
The tax definition of dependant determines whether a super death benefit is paid tax-free or with up to 17% tax on the taxable component. It is wider than everyday usage and is set out in section 302-195 of the Income Tax Assessment Act 1997.
The tax-dependant test is also broader than the super law dependant test used for binding death benefit nominations under the Superannuation Industry (Supervision) Act 1993, Section 10. The two definitions overlap but are not identical.
| Relationship | Tax dependant? | |---|---| | Current spouse or de facto | Yes | | Former spouse or former de facto | Yes | | Child under 18 | Yes | | Child 18 or over | Only if financially dependent or interdependent | | Financial dependant | Yes | | Interdependency relationship | Yes | | Adult children with own income | No (unless financially dependent or interdependent) | | Parents, siblings, friends | Only if financially dependent or interdependent |
Financial dependency is assessed at the time of death. The beneficiary must have relied on the deceased for ordinary living expenses (food, accommodation, education, healthcare).
Key points:
An interdependency relationship exists when:
A partial interdependency can exist where the parties don't live together due to physical, intellectual, or psychiatric disability but all other elements are met. Examples include adult children caring for elderly parents, or unmarried siblings sharing a household. Authority: Taxation Ruling TR 2010/1.
Complex family situations should be assessed with a qualified adviser or tax specialist; this is general information only.
Rachel's 22-year-old daughter lives with her while studying full-time, with Rachel providing accommodation and living expenses. The daughter works part-time earning $15,000 annually. She qualifies as a financial dependant, receiving Rachel's $450,000 super death benefit tax-free.
Michael's 30-year-old son lives independently with his own income and family. He's a non-dependant for tax purposes, paying 17% tax on the taxable component of Michael's super death benefit.
Emma and her elderly mother have an interdependency relationship - they live together, Emma provides care and support, and they share financial resources. The mother qualifies as a tax dependant, receiving Emma's super death benefit tax-free despite being the parent rather than spouse or child.
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