When does a Step-Child cease to be a Step-Child?

The ATO has concluded that an individual who is a step-child will cease to be a step-child upon the termination of the member’s marriage with the child’s parent. 

For example if Bill marries Mary, then any children of Mary will be Bill’s step-children.  However, if Bill and Mary divorce or Mary dies, then Mary’s children will cease to be Bill’s step-children.

Consequently, Mary’s step-children will not be eligible to be a dependant of Bill (and, therefore, eligible to participate in Bill’s death benefit) by reason only of being former step-children of Bill. 

For completeness it should be noted that while a former step-child is not a “dependant” merely by reason of being a former step-child, they may nevertheless qualify as a dependant on another basis such as being a “financial dependant” or as being in an “interdependency relationship”.

The reference of the Interpretation Decision is ATO ID 2011/177.