ATO interpretive decision impacts step-children
The Australian Taxation Office (ATO) has recently released an interpretive decision which is highly relative to self-managed super fund (SMSF) succession planning, according to Bryce Figot, senior associate for DBA Lawyers.
The interpretive decision, ATO ID 2011/77, considers when a stepchild ceases to be a child of a stepparent and, more particularly, answers the question of whether a stepparent's superannuation death benefits may be paid to a stepchild if the stepparent is divorced from the stepchild's biological parent before death.
According to Figot, the ATO's position is that a stepchild ceases to be a dependant after the divorce, but he added that such a position had a number of important implications.
"Firstly, remember that an ATO ID is not the law," he said. "However, assuming that the view in ATO ID 2011/77 is correct (which DBA Lawyers believes it to be), the most obvious implication is that superannuation fund trustees typically may not pay out a deceased stepparent's superannuation death benefits to a stepchild where divorce has occurred.
"This implication gives rise to a subsequent, less obvious, implication," Figot continued. "Namely, non-biological children of superannuation fund members typically cease being beneficiaries of the fund upon divorce."
Figot said that it may surprise many to learn that such a scenario was often very positive news for superannuation funds.
"Remember that the beneficiaries of a superannuation fund are much broader than the members," he said. "Further, beneficiaries have various rights, such as compelling proper administration of the fund by the trustee, having the trustees act in good faith and inspecting trust documents, including the governing rules (eg, the trust deed) and trust accounts.
"Accordingly, children of a member's former spouse can't use such rights to make a nuisance of themselves [or use them as leverage in a family law property settlement negotiation]."
Recommended for you
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
The second tranche of DBFO reforms has received strong support from superannuation funds and insurers, with a new class of advisers aimed to support Australians with their retirement planning.
The financial services technology firm has officially launched its digital advice and education solution for superannuation funds and other industry players.
