Former Spouse as a Tax Act Dependant

The ATO has, in a recently issued Interpretative Decision ATO ID 2011/83, indicated that the concept of “former spouse” as used in the Tax Act includes a same sex spouse even if the relationship with the member ended before the 2008/09 financial year.  The significance of the 2008/09 financial year is that before this year, same sex marriages were not recognised for taxation and super purposes.

Consequently, if a member who died during July 2011 was previously involved in a same sex relationship which ended in, say, May 2005, it may be possible for that former partner to be treated as Tax Act dependant of the member.

This Interpretative Decision is interesting in that it highlights the difference between the SIS Act and the Tax Act when dealing with spouses and former spouses for superannuation purposes.

The SIS Act provides that the term “spouse” only applies to current spouses and not former spouses while the Tax Act provides that the term can cover both current and former spouses.  The significance of this difference is that the SIS Act specifies who is eligible to receive death benefits while the Tax Act specifies the taxation treatment of any death benefit.  Based on this difference, a former spouse is not for SIS Act purposes a “spouse” and this Interpretative Decision does not alter that position.

The Interpretative Decision does, however, mean that if the super death benefit is paid to the Estate of the deceased member and the former spouse (whether same sex or not) is entitled to that benefit under the terms of the Will, then the benefit will be tax free if paid to the former spouse.

For completeness, it should be noted that while a former spouse may not qualify as a spouse for SIS Act purposes, they may nevertheless qualify as a dependant on the basis of say “financial dependant” or as being in an “interdependency relationship”.