ATO Interpretative Decision
ATO ID 2011/77
Superannuation
Payment of death benefit to former stepchild: meaning of 'child' and 'dependant'FOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a person a 'stepchild' of a member of a self managed superannuation fund and therefore a 'dependant' of the member under regulation 6.22 of the Superannuation Industry (Supervision) Regulations 1994 (SISR), if the legal marriage of the person's natural parent to the member has ended?
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.
Facts
A member (M) of a self managed superannuation fund was legally married to P. P is the natural parent of S, who was born while P was married to another person.
The marriage of M and P ended in divorce.
M has died.
M did not formally adopt the child S under any state or territory law.
The trustee of the fund must determine whether S is a dependant of M because S has been a 'stepchild' of M.
Reasons for Decision
Regulation 6.22 of the SISR specifies the range of persons in whose favour the benefits of a member of a regulated superannuation fund may be cashed after the member's death.
Subject to limited exceptions, subregulation 6.22(2) of the SISR provides that death benefits must be cashed in favour of a member's legal personal representative and/or one or more of the member's dependants.
Subregulation 6.22(3) of the SISR allows death benefits to be cashed in favour of another individual if, after making reasonable enquiries, the fund trustee is not able to find either a legal personal representative or a dependant of the member.
The term 'dependant' is not defined in the SISR and is therefore given the same meaning as in the Superannuation Industry (Supervision) Act 1993 (SISA), pursuant to paragraph 13(1)(b) of the Legislation Act 2003.
Subsection 10(1) of the SISA defines 'dependant', in relation to a person, as including 'the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship'.
As the definition of 'dependant' is an inclusive one, it also covers a 'dependant' within the ordinary meaning of the word, including someone who is financially dependent on a person (Malek v. FC of T 99 ATC 2294; (1999) 42 ATR 1203; [1999] AATA 678.
Subsection 10(1) of the SISA defines the meaning of 'child' in relation to a person, as including:
- (a)
- an adopted child, a stepchild or an ex-nuptial child of the person, and
- (b)
- a child of the person's spouse, and
- (c)
- someone who is a child of the person within the meaning of the Family Law Act 1975.
The term 'stepchild' is not defined in the SISA or the SISR and is therefore given its ordinary or 'common law' meaning, having regard to the context in which it appears.
The Macquarie Dictionary defines 'stepchild' as 'a child of a husband or wife by a former union'. Similarly, the Australian Oxford Dictionary describes it as meaning 'a child of one's husband or wife by a previous marriage'. However, it is not clear from these definitions whether a child remains a stepchild of a person after that person's relationship with the child's natural parent ends.
At common law, a child ceases to be stepchild of a step-parent when the relationship between the child's natural parent and the step-parent ends, that is, on the death of the natural parent or the divorce of the natural parent from the step-parent. This position originated in the case of Re Burt [1988] 1 Qd R 23 (Re Burt) and has been followed in a number of judicial decisions including Re Marstella [1989] 1 Qd R 638, 12 Fam LR 787, Basterfield v. Gay [1994] TasSC 120, (1994) Tas R 293 and Re Monckton [1995] QCA 321, [1996] 2 Qd R 174).
In Re Burt, the Queensland Court of Appeal was required to consider the meaning of 'stepchild' under the Succession Act 1967-1977 (Qld), for the purposes of determining whether the natural children of a deceased parent were eligible to apply for family provision out of the estate of that parent's former spouse.
Overturning the decision at first instance (and overruling the cases of Re Nielsen [1968] Qd R 221 and Re Trackson [1967] Qd R 124), the Court held that the relationship of stepchild and step-parent does not subsist after the termination of the marriage which creates it, whether by divorce or death. That is, the step-relationship only exists while the natural parent is married to the step-parent.
In this case, McPherson J observed at page 25 that the definition of 'stepchild' in the Act, being 'a child by a former marriage of the deceased's husband or wife', did not expressly include a child by a former marriage of that person's former husband or wife.
Following an examination of the meaning given to 'stepchild' in other legal contexts, his Honour concluded at pages 27 to 28 that the term has a natural or ordinary meaning and 'the relationship it connotes is ordinarily regarded as coming to an end on the termination of the marriage that gave rise to it'. Consistent with other provisions of the Act, the definition was therefore only intended to include those children whose natural parent was still married to the deceased at the time of death.
In the same case, Andrews CJ, expressed the following view at page 24:
I am satisfied that the relationship of affinity between step-parent and stepchild which comes into being with the marriage of the child's natural parent with the step-parent depends for its continued existence upon the continuity of that marriage and that it ceases with the termination of that marriage whether by death or divorce.
Similarly, Thomas J said at page 32:
The status of stepchild, as ordinarily understood, does not apply to the case in which the natural parent has been divorced from the step-parent and probably does not survive the death of the natural parent.
The Superannuation Complaints Tribunal has followed the common law position when dealing with complaints relating to the payment of death benefits.
For example, in Superannuation Complaints Tribunal Determination D04-05\186 the Tribunal made a determination setting aside the decision of a trustee to pay a member's death benefit to the children of a deceased person's former spouse. The Tribunal held that it was bound by the common law view that a stepchild relationship ends on the death of a natural parent. As the children ceased to be the 'stepchildren' of the member on the death of their natural parent, they were not 'dependants' of the member when they died.
Similarly, in Superannuation Complaints Tribunal Determination D99-2000\082 the Tribunal set aside the decision of a trustee to pay a member's death benefit to the child of a former spouse on the basis that the child ceased to be a 'stepchild' and a 'dependant' of the member when the child's natural parent was divorced from the member.
Consistent with this approach, it is the Commissioner's view that the relationship of stepchild to step-parent is severed when the marriage between the natural parent and the step-parent ends, that is, on the death of the natural parent or on the divorce of the natural parent from the step-parent.
Accordingly, an individual does not continue to be a 'stepchild' and a 'child' of a member within the meaning of subsection 10(1) of the SISA, for the purposes of being a 'dependant' of the member under regulation 6.22 of the SISR, if the marriage of their natural parent to the member ends, on death or divorce, before the death of the member.
Furthermore, having regard to the construction of the definition of 'child' in subsection 10(1) of the SISA, the Commissioner considers that the term 'stepchild' in paragraph (a) is only used in relation to individuals who are legally married. This is because paragraph (b) of the definition, which refers to 'a child of the person's spouse', would apply to a child of a natural parent in a defacto relationship.
Therefore, the trustee in this case cannot treat S as a stepchild of M for the purposes of identifying M's dependants.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 16 June 2023 | Reasons for Decision, Paragraph 4 | Legislation name change - Legislative Instruments Act 2003 renamed Legislation Act 2003 |
| Legislative References, Reference 2 | Legislation name change - Legislative Instruments Act 2003 renamed Legislation Act 2003 |
Year of income: Year ended 30 June 2012
Legislative References:
Superannuation Industry (Supervision) Act 1993
subsection 10(1)
paragraph 13(1)(b) Superannuation Industry (Supervision) Regulations 1994
regulation 6.22
subregulation 6.22(2)
subregulation 6.22(3)
Case References:
Re Burt
[1988] 1 Qd R 23
[1989] 1 Qd R 638
12 Fam LR 787 Basterfield v. Gay
[1994] TasSC 120
(1994) 3 Tas R 293 Re Monckton
[1995] QCA 321
[1996] 2 Qd R 174 Malek v. FC of T
99 ATC 2294
(1999) 42 ATR 1203
[1999] AATA 678 Re Nielsen
[1968] Qd R 221 Re Trackson
[1967] Qd R 124
Other References:
Superannuation Complaints Tribunal Determination D04-05\186
Superannuation Complaints Tribunal Determination D99-2000\082
The Australian Oxford Dictionary, 2004, 2nd edn, Oxford University Press, Oxford Reference Online
The Macquarie Dictionary (Online), 2009, 5th edn, Macquarie Dictionary Publishers Pty Ltd
Keywords
Self managed superannuation funds
Death benefits - superannuation benefits
Dependants
Stepchildren
Children
Date reviewed: 6 June 2023
ISSN: 1445-2782
| Date: | Version: | |
| 6 September 2011 | Original statement | |
| You are here | 16 June 2023 | Updated statement |