The deceased was the sole member of an SMSF and the deceased and beneficiary were the directors of the corporate trustee of the fund.

The beneficiary received death benefit payments from the fund, in the form of cash, property transfer, and share transfer and the fund withheld an amount of tax from these payments.

The facts continued that the beneficiary, with their family (a spouse, and child) moved from their home to live with the deceased until the date of death to enable the beneficiary to perform carer duties for the deceased, including carrying out all household chores and helping with the dispensing of medication after the deceased was diagnosed with a terminal medical condition.

The deceased provided the beneficiary with ongoing assistance via regular monthly payments of expenses incurred on the beneficiary's credit card, such as groceries, utilities, council, water rates, and insurance as well as making a lump sum payment to discharge the mortgage on the beneficiary's property. The deceased also paid all household expenses while the beneficiary lived with her.

The beneficiary had previously moved out of the parents' home to start their own family but lived directly across the street from the deceased, before moving back to take care of the deceased during the illness.

The beneficiary's property was vacant during the period up until the date of death and the beneficiary's spouse was not employed for a certain period during this time. The beneficiary also received a carer allowance from Centrelink for taking care of the deceased and received passive income from ownership of “low rent” property.

A partial payment was made to the beneficiary's personal bank account made up of an off-market transfer less tax which was put aside for potential payment if the beneficiary was found not to be a dependant for tax purposes.

A second payment was made to the beneficiary's personal bank account made up of several payments, plus a property transfer.

In its reasoning for its decision, the tribunal stated the beneficiary was a dependent of the deceased just before the deceased died, therefore paragraph 302-195(1)(d) of the Income Tax Assessment Act 1997 is satisfied and the beneficiary is a death benefits dependant of the deceased.

“As the beneficiary had previously moved out of the family home, and no longer lived permanently with the deceased, as is required by paragraph 302-200(1)(b) of the ITAA 1997 (and there is no information to suggest that the reason they did not live together is that either or both of them suffer from a physical, intellectual or psychiatric disability, as required by paragraph 302-200(2)(c) of the ITAA 1997), the requirements of paragraph 302-195(c) of the ITAA 1997 (interdependency relationship) cannot be satisfied. Therefore, it is necessary to consider paragraph 302-195(1)(d) of the ITAA 1997 - a 'dependant' of the deceased person just before he or she died,” the ruling stated.

“The definition of death benefits dependant does not stipulate the nature or degree of dependency required to be a dependant of the deceased person in paragraph 302-195(1)(d) of the ITAA 1997. However, it is generally accepted that this paragraph refers to financial dependence.”

It continued that there are a number of case law decisions that specify what is required to establish financial dependency, specifically, the definition of dependency addressed and interpreted in the High Court case of Kauri Timber Co (Tasmania) Pty Ltd v. Reeman (1973) 47 ALIR 184.

In this case, the court stated that “the principle underlying these authorities is that it is the fact of dependence or reliance on the earnings of another for support that is the test”.

“This was also reflected in Edwards v Postsuper Pty Ltd [2007] FCAFC 83 where the Full Court of the Federal Court agreed with the Tribunal that while the deceased provided many gifts to his family, it did not consider that would make the appellants and their family financially dependent on the deceased,” the ruling said.

“While it is not necessary for a deceased and beneficiary to live together during the period up to and including the date of death in order for the beneficiary to be a death benefits dependant due to financial dependency, it is considered to be more likely where the parties live together.”

It continued that the evidence supplied to the tribunal suggested that the beneficiary lived with the deceased for a reasonable period before the deceased's death, even if it does not definitively confirm they lived together at the date of death.

“Evidence has been provided, in the form of invoices, bank statements and credit card statements, in support of the claim that the deceased paid a substantial amount towards bathroom renovations for the beneficiary's property,” it said.

“The majority of the claimed payments have been verified by third-party documentation and were able to be cross-checked to show both the outgoing payment and the receipt of that payment. These payments were both substantial in amount, and regular in their frequency.

“In addition, given the lack of other regular sources of income for the beneficiary (and their spouse) over the relevant period (including the spouse being unemployed for a substantial portion of that period), it is considered that the beneficiary was substantially reliant on regular and continuous financial support from the deceased for her ordinary living expenses.”

The tribunal concluded that based on the evidence provided, the commissioner is satisfied that the beneficiary was a person who was substantially reliant on regular and continuous financial support from the deceased for her ordinary living expenses.