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Cutting through the red tape of dependency
If someone dies owing you money and you were relying on their promised repayment to meet your mortgage payments and to pay your outstanding bills, were you financially dependent on them? Can you make a claim on their superannuation death benefit?
The short answers are no, and no. But superannuation fund trustees see a steady stream of death benefit claims from people saying they were financially dependent on deceased members in these and other circumstances. These claims can be enormously complex and difficult.
The term financial dependant is not defined in superannuation or tax legislation, but rules of thumb and guiding principles can be distilled from case law and from the decisions and pronouncements of the Superannuation Complaints Tribunal.
It is easiest to start with what financial dependency is not — it is not a debtor-creditor relationship, it is not the payment of funeral expenses, it is not a relationship with a kindly friend or relative who dispensed generous gifts from time-to-time, and it is not being the owner of a family business in which the deceased member worked for nominal rather than market wages.
In other words, it is not a relationship that arises merely because the claimant considers they have a moral claim to the benefit arising out of some sort of financial dealing with the deceased.
To be satisfied that a claimant was financially dependent, a trustee must have reliable evidence demonstrating that the claimant relied upon the member’s financial contributions to maintain their normal standard of living. This generally means that the trustee must examine details of the claimant’s financial position, including their income and expenditure, and information showing the nature and extent of the support provided.
The trustee must sift through this material, clarify any areas of uncertainty by asking questions or calling for additional evidence, and form a view as to whether it supports a claim.
Sometimes a claimant has enjoyed sources of income in addition to the support provided by the member (eg, Centrelink payments or wages from casual employment).
In this case, the trustee must decide whether this income underpinned the claimant’s usual standard of living, with the deceased member’s contribution merely providing additional comfort or luxuries, or whether the facts support the opposite conclusion.
On occasion, the information provided by a claimant shows that they chose to, but need not have, relied on the deceased member’s financial support.
Trustees faced with these situations must be careful to assess the situation as it actually existed at the time of the member’s death and not be tempted to rewrite history.
In some cases, financial dependency can exist even though the deceased was not actually providing support at the time of their death. A claimant may establish a dependency on the basis of having been in a position, immediately prior to the member’s death, to enforce an order or some other legal obligation under which the member was required to provide financial support.
If the member had ceased temporarily to provide support because of illness, absence or other reasons, financial dependency may still exist if the claimant can satisfy the trustee that the support was to have resumed at an agreed time or once the obstacle to its provision had been removed.
The type of support provided by a deceased member can require careful analysis if it involved the provision of goods or services rather than cash or the payment of bills.
For example, a claimant who was provided with permanent accommodation by the deceased member (but no other support) may have been financially dependent upon the member. Provision of holidays, temporary accommodation, cars and the use of goods owned by the member may not, however, be sufficient to create a dependency relationship.
Trustees must also consider any labour or services provided by the claimant. For example, a claimant who has received regular visits from a member for the purposes of providing entertainment and company is not financially dependent.
However, a claimant may be dependent on a member who has provided daily nursing care, cleaning and gardening services, transport and other assistance, if the claimant has no option but to purchase these services at arms length after the member’s death.
These examples are indicative only. Trustees must consider all relevant circumstances and guiding principles in order to determine how they apply in each case.
Heather Gray is a partner with legal firm Holding Redlich.
AUTHOR
Mike Taylor
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