I am delighted to have a guest post today from Donal Griffin of Legacy Law on the evolution of the dependency and interdependency rules surrounding receipt of superannuation death benefits. Here is Donal’s summary of a very recent ATO decision:
On 18 July 2014, the ATO released ATO Interpretive Decision 2014/22 which confirmed their view that a child who cared for an elderly parent was a dependant and in an inter-dependant relationship.
The writer suggests that it is a sign of the times. 10 years ago, people were keen to show that grandparents’ support for their children by paying school fees meant that the grandchildren were financially dependant with the result that superannuation could be paid to them tax free. The ATO have issued rulings to discourage attempts to contrive dependency.
In February 2014, the ATO showed that certain adult children could be dependants. In ATO ID 2014/6, the Commissioner found that “The Youth Allowance payments the taxpayer received were calculated at a lower ‘at home’ rate as opposed to the higher ‘independent’ rate. This indicates that the taxpayer was substantially financially dependent. A comparison of the level of financial support provided by the taxpayer’s parent with that provided by the Youth Allowance payments also indicates that the taxpayer was financially dependent.”
Private Binding Ruling 67744 dealt with a situation where the parent died. The Commissioner found that all of the requirements of inter-dependency were met.
Previously, it was made clear that support and care must be significant and a link to being unwell or suffering emotionally. This was to be beyond the support one would hope to get from a friend or flatmate who prepares an occasional meal.
The AAT in Malek’s case considered whether the support was necessary. In the later Private Binding Ruling 91657, the above authorities were considered and the net question was whether the person would be able to meet their daily basic necessities (shelter, food, clothing etc) without the additional financial support.
Where a parent needs support, most people would consider it part of the usual familial relationship to support them. However, the facts need to demonstrate that what might be termed a normal familial relationship has changed so that there is a demonstrable mutual commitment to a shared life.
It seems that moving in with a parent and supporting them with a commitment to continue to look after them for the rest of their life is sufficient to establish interdependency. The writer suggests that this relationship can helpfully be confirmed in writing by the parent in the course of their estate planning.
Donal Griffin is a Director of Legacy Law Pty Limited and can be contacted at 02 8226 8851 or at dgriffin@legacylaw.com.au.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.
Liam Shorte B.Bus SSA™ AFP
SMSF Specialist Advisor™ & Financial Planner
Tel: 02 8853 6833, Mobile: 0413 936 299
liam@verante.com.au
PO Box 6002 BHBC, Baulkham Hills NSW 2153
Liam Shorte is a partner in VERANTE Financial Planning, Corporate Authorised Representative of Genesys Wealth Advisers Limited, Licence No 232686, Genesys Wealth Advisers Limited ABN 20 060 778 216 • AFSL No.232686
Important information :
The information in this article is provided for illustrative purposes only and does not take into consideration your personal circumstances. You are encouraged to seek financial advice suitable to your circumstances to avoid a decision that is not appropriate. Any reference to your actual circumstances is coincidental. Genesys and its representatives receive fees and brokerage from the provision of financial advice or placement of financial products.
Our copy of our Financial Services guide can be obtained by clicking here or visiting our main www.verante.com.au website.
