ATO ID – can former step children be dependants for death benefits
The ATO have recently released an interpretative decision (ATO ID 2011/77) dealing with the issue of “former” step children, and the meaning of child and dependants for the purpose of paying out SMSF death benefits.
The Question
Consider the following example:
Jack and Jill were married. Little Bill is Jill’s son from a former marriage.
Hence Little Bill was Jack’s step son.
However, Jack and Jill’s marriage ended a few years ago in divorce.
Now, Jack has died, and did not formally adopt Little Bill under any state or territory law.
So the question is – can Little Bill be classed as a dependant of Jack’s (under the SIS Act, and hence be eligible for a death benefits payout from Jack’s super fund) because Little Bill has previously been a ‘stepchild’ of Jack’s ?
The Decision
“No. A person ceases to be a ‘stepchild’ for the purposes of being a ‘dependant’ of the member under regulation 6.22 of the SISR, when the legal marriage of their natural parent to the member ends.” – ATO
So no, Little Bill will not be classed as a dependant of Jack’s in our example.
Exceptions
Note that there are a couple of exceptions in this case:
- Little Bill may still be a ‘dependant’ of Jack’s if for some reason Little Bill had an ‘interdependency relationship’ with Jack, or;
- Little Bill was a ‘dependant’ of Jack’s within the ordinary meaning (financially dependent on Jack), at the date of Jack’s death.
- Jack had legally adopted Little Bill.
Note also that subregulation 6.22(3) of the SISR allows death benefits to be paid to non-dependants if, after making reasonable enquiries, the fund trustee is not able to find either a legal personal representative or a dependant of the member.
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