Superannuation death benefits: what is an interdependent relationship?
When a member of a superannuation fund passes away, the trustee of that fund can only pay the remaining superannuation to certain classes of people, in line with the fund’s rules and relevant legislation. This payment is known as a superannuation death benefit.
Most superannuation funds allow their members to nominate who they wish to receive their super on their death. However, those nominated must fall within the classes of beneficiaries permitted by the fund’s rules and superannuation legislation. These beneficiaries are known as death benefit dependants.
Understanding who qualifies, and how, is critical. It affects not only who can receive the benefit, but whether payment is taxed.
Who can be a death benefit dependent?
Whether someone qualifies as a dependant of the deceased is determined under both superannuation law and taxation law. While the definitions are similar, the purpose is different: see the table below.
| Feature | Superannuation dependant | Tax dependant |
|---|---|---|
| Purpose | Determines who can receive the money | Determines whether the payment is tax-free |
| Spouse | Current spouse (married or de facto) | Current or former spouse |
| Children | Any age | Under 18 years old only |
| Adult children | Yes (eligible to receive) | No (taxed as non-dependant) |
| Former spouse | No (unless interdependency) | Yes |
| Interdependency | Yes | Yes |
| Financial dependant | Yes | Yes |
This distinction matters. An adult child, the deceased’s parents, siblings, other family members of the deceased or persons not related to the deceased, are not usually categorised as a (tax) dependant. However, they may qualify if they can show either:
- financial dependency; or
- an interdependent relationship with the deceased at the time of death.
What is an interdependent relationship?
- An interdependent relationship exists where, at the time of death, two people: had a close personal relationship;
- lived together;
- provided the other with financial support (one or both ways); and
- provided the other with domestic support and personal care (one or both ways).
All four of the above elements must be satisfied to establish an interdependent relationship existed. However, if the parties cannot live together due to a disability, they may still qualify even if the living together requirement is not met.
How is an interdependent relationship assessed?
To assist in determining whether an interdependant relationship existed, the entire nature of the relationship between the deceased and the potential dependent will be taken into account. Relevant considerations may include:
- the duration of the relationship;
- whether a sexual relationship existed;
- ownership, use and acquisition of property;
- the degree of mutual commitment to a shared life;
- care and support of children;
- the reputation and public aspects of the relationship;
- degree of emotional support;
- whether the relationship was one of convenience; and
- any evidence suggesting that the parties intend the relationship to be permanent.
In cases where a parent, adult child or sibling of the deceased is a potential dependant, focus is generally put on whether a close personal relationship existed, beyond a typical loving family connection.
This usually requires evidence of ongoing financial, personal and emotional support that demonstrates a mutual commitment and reliance.
Why this matters
If someone believes they were in an interdependent relationship with the deceased, that claim can significantly affect:
- who ultimately receives the superannuation death benefit;
- whether the payment is taxed; and
- whether a dispute arises between potential beneficiaries.
Because entitlement depends on the specific facts of the relationship at the time of death, these matters are often highly fact sensitive. Small differences in living arrangements, financial support or personal care can change the outcome.
Assessing dependency in superannuation death benefits
The law governing superannuation death benefits is complex. Whether a person qualifies as a death benefit dependant, particularly under the interdependency provisions, depends on the individual circumstances.
This article addresses only one aspect of superannuation death benefits and one class of death benefit dependants. It’s important to note that other relationships and facts may also establish dependency, including situations involving disability or financial reliance.
If you or a loved one is dealing with the payment of superannuation death benefits under an estate, or a potential dispute about entitlement, early legal advice is essential to clarify rights, manage risk and protect the intended outcome.
If you require assistance with superannuation death benefits, including assessing an interdependent relationship or managing a potential dispute, our specialised Private Clients Team is here to help.
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