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Meaning of child for super and tax purposes


Thursday 01 February 2018

Why is the meaning of child for super and tax purposes important?

The meaning of child is relevant for a range of purposes including:

  • eligibility to receive a member’s death benefits directly from a super fund (subject to the fund’s governing rules)
  • eligibility to receive a member’s death benefits in pension form (provided the child is under age 18, under 25 and financially dependent or suffering from a qualifying disability and subject to the fund’s governing rules)
  • the availability of the death benefit dependant tax concessions, and
  • a superannuation fund’s eligibility to claim a tax deduction to fund an ’anti-detriment payment’ for death benefit lump sums (generally only applicable before 1 July 2017).

The definition is also used for the purposes of various Superannuation Industry (Supervision) Act 1993 (SIS) investment restrictions including:

  • who is a relative for the purpose of the prohibition against lending or providing financial assistance to members or their relatives, and
  • who is a related party for the purposes of the restrictions on acquiring assets from a related party or holding in-house assets.

Who qualifies as a child under super and tax law?

For SIS and tax law purposes, a child of a person includes:

  • an adopted child, a stepchild or an ex nuptial child of the person
  • a child of the person’s spouse, and
  • someone who is a child of the person within the meaning of the Family Law Act 1975.

A child of the person’s spouse (which includes a de facto spouse) or a child of the person under family law automatically qualifies as a child (and therefore a dependant) of the person without needing to prove interdependency or 'ordinary meaning' dependency.


Why is a child of the person’s spouse included in the definition?

The inclusion of a child of the person’s spouse recognises children of an opposite-sex or same-sex de facto partner by a former relationship. The effect is that a child of the person’s spouse also automatically qualifies as a child of the person, without needing to be an adopted child or a stepchild of the person.


Impact of divorce or death on stepchildren and children of spouses

At common law, a stepchild means a child of a husband or wife by a former marriage. The continued existence of a stepchild/step-parent relationship depends on the continuity of the marriage of the child’s natural parent with the step-parent. If the marriage ends, either by divorce or death, the stepchild/step-parent relationship will cease (see ATO ID 2011/77).


Example

Greg and Angela are legally married. Greg is the natural parent of Mabel who is a child of Greg’s previous marriage. While Greg and Angela remain married, Mabel is Angela’s stepchild and is therefore considered a child of Angela.

If Greg and Angela divorce, the stepchild/step-parent relationship will cease.

This means that Mabel would no longer be considered Angela’s child (unless she had been adopted by Angela).

If Angela was to die, leaving Mabel as a beneficiary of her superannuation, Mabel would need to prove she was otherwise a dependant (for example, under interdependency or ‘ordinary meaning’ dependency) to be able to receive benefits directly from the fund, or to qualify for the more favourable tax treatment afforded to dependants under tax law.


A similar outcome would arise in relation to a child of a person’s de facto partner who is not otherwise a child of the person (eg because of adoption) if the de facto relationship breaks down or if the person’s de facto partner dies.


Who is a child under the Family Law Act 1975?

The key practical impact of the inclusion of the reference to the Family Law Act is that a child born to a woman as a result of an artificial conception procedure while the woman was in a de facto relationship (whether an opposite-sex or same-sex relationship) is recognised as the child of both the woman and her partner (as long as the woman’s partner consented to the procedure and any donor of genetic material consented to the material’s use in the procedure). In addition, a child of a person includes a child born as a result of an artificial conception procedure where the child is a child of the person under a prescribed State or Territory law.

The meaning of child in family law also includes a child who is a child of a person because of a court order made under a State or Territory law that gives effect to a surrogacy arrangement. Currently laws in WA, Vic, ACT, Qld, SA, NSW and Tas are prescribed for this purpose. These laws could potentially cover a child born as a result of a surrogacy arrangement involving a de facto couple in certain circumstances but.


Useful references

Macquarie Fastfacts: Super death benefit nominations

Macquarie Fastfacts: Anti-detriment payments upon death

Macquarie Fastfacts: Meaning of spouse for super and tax purposes

Macquarie Fastfacts: Meaning of dependant for super and tax purposes

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