A series of private binding rulings (PBR) issued by the ATO in 2024 has reinforced the fact SMSF trustees cannot argue a child is eligible to receive a superannuation death benefit based purely on their conventional relationship with their parents.
According to Accurium senior SMSF educator Anthony Cullen, at least five ATO PBRs issued between April and September considered a situation where either a child or parent was able to receive a super death benefit because their relationship within the family unit meant the interdependency condition as defined in the Superannuation Industry (Supervision) (SIS) Act was satisfied.
When examining the ATO’s decisions in these cases, none of them were decided in the applicant’s favour.
“One of the common themes coming out of the rulings that we’ve highlighted is the ATO is saying, when it is looking at interdependent relationships between parents and children, is that for interdependency to be in place the ATO would expect that relationship goes beyond one which you would normally expect to have between a parent and a child,” Cullen told attendees of a technical webinar held yesterday.
Further, he pointed out these outcomes illustrated how difficult it is to satisfy the interdependency relationship criteria due to the number of conditions the SIS Act stipulates and the fact SMSF trustees need to satisfy every single one of them to meet the overall definition.
Given the challenge in proving an interdependency relationship exists between parents and their children, he suggested a different approach be used to ensure either party qualifies to be a superannuation death benefit recipient under the existing legislation.
“What you probably want to be looking at when you’re trying to work through these examples of [PBRs] with your clients, or the beneficiaries of your clients who may have passed away, is that maybe [using] financial dependency as grounds [to justify their legal ability to receive super death benefits] is the better option to be looking at rather than an interdependency relationship,” he said.
“That’s not to say you can’t have a parentage built into an interdependent relationship, but the standards are set really high and, as I said before, you need to tick off every single point.”
