ATO ID – is a former spouse from a same sex couple a death benefits dependent?
The ATO have recently released an Interpretative Decision (ATO ID 2011/83) dealing with the issue of whether or not a former spouse of a same sex couple qualifies as a superannuation death benefits dependent – even though the relationship ended prior to same sex couples being included as “spouses”.
Why is this important?
As you may be aware, if a superannuation death benefit payment is made to someone who qualifies as a ‘death benefits dependent’ of the person who has died, the payment attracts very favorable tax treatment (lump sums are tax free).
Hence, to be treated as a death benefits dependent can mean the difference of many thousands of dollars in the final payout.
The case
In the case at hand, a superannuation fund member has died in the 2010-2011 income year, and as such a superannuation death benefit from the deceased’s superannuation fund has been paid out to a beneficiary during the 2010-2011 income year.
The beneficiary and the deceased were not legally married, however they did live together on a genuine domestic basis in a relationship as a same sex couple for a number of years.
Now here’s the punch line – their relationship ended in the 2003 year !
Now normally, a “former spouse” of the deceased is indeed included as a death benefits dependent for tax purposes.
However, the definition of ‘spouse” to include same sex couples was only changed in the 2008 / 2009 income year.
So you can see now the question is obvious – even though the relationship ended in 2003 prior to the change in “spouse” definition to include same sex couples in 2008/09 – will the beneficiary now in 2010-11 be treated as a death benefits dependent ?
The decision
“Yes. Although the definition of ‘spouse’ was only amended to include same sex couples subsequent to the relationship ceasing, the taxpayer is a ‘former spouse’ of the deceased superannuation fund member in terms of paragraph 302-195(1)(a) of the ITAA 1997.” – ATO.
So in essence, yes, the beneficiary will be treated as a former spouse and hence as a death benefits dependent and will receive the favorable tax treatment on the payout received.
For SMSF members that can personally relate to this sort of situation, it may now present a number of estate planning possibilities that you may not have though previously possible.
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