06 Nov Step Children, Blended families and Super

There are now more and more blended families in Australia and the chances of having to deal with former spouses and stepchildren claiming a share of a deceased persons superannuation fund death benefits has increased significantly.

The regulatory bodies, tribunals and courts claim increased activity for claims from those former wives/husbands and stepchildren seeking a share of the death benefits of a member’s superannuation fund. This created the need to define who is a dependant spouse or child or stepchild entitled to claim.

The key word is ‘dependant’. The Australian Taxation Office has released ATO ID 2011/77 which deals with the “Payment of death benefits to former a stepchild meaning a ‘child’ and ‘dependant’. The interpretative decision from the ATO gives clarification on eligibility and they say “ if a person is a ‘stepchild’ of a member of a self-managed superannuation fund and also is a ‘dependant’ of the member, then a person ceases to be a ‘stepchild’ for the purposes of being a ‘dependant’ of a member under superannuation regulation 6.22, when the legal marriage of their natural parent to the member ends. (see also Superannuation Reg 6.22 which specifies the range of persons in whose favour member benefits of a regulated fund may be cashed in favour of the member’s personal legal representative or one or more of the member’s dependants.)

The Superannuation Industry (Supervision) Act 1993 (SISA). SISA defines ‘dependant’,( SIS Regulations do not provide a definition ) in relation to a person, which includes ‘the spouse of the person, any child of the person and any person with whom the person has an inter-dependency relationship’. The term ‘dependant’ also includes one who is financially dependent on a person.

The term ‘stepchild’ is not defined in either SISA or SISR and is therefore given its ordinary or common law meaning. At common law, a child ceases to be a 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, unless the step parent has adopted the child who then will be treated as a natural child.

It is important following this interpretative decision from the ATO that members of self-managed superannuation funds review their estate plan’s within their fund and the trust deed of the fund in relation to death benefit payments. Remembering that a member’s personal Will does NOT deal with self-managed superannuation benefits unless the benefits are paid to the estate of the deceased.