Highlights:
- Superannuation claims can progress from Total and Permanent Disability to Terminal Illness to Death benefit.
- If you are a dependant of the deceased, you must ensure you satisfy the criteria in order to be eligible to claim the death benefit, failure of which could end in hefty tax implications.
Summary:
A young woman needs to prove she was dependent on her dying father to get his Superannuation Death Benefit payout tax-free.
Case Details:
The client, in this case, was a man diagnosed with terminal cancer directly attributed to his employment. Carbone Lawyers represented him in lodging a terminal illness claim against his superannuation fund.
Unfortunately, the client passed away while it was being processed, and the matter then turned into a Death Benefit claim against his superannuation insurance.
The man’s only daughter was 19 at the time of his death. She was a student living full-time with her father and had taken care of him during his illness.
She was one of two beneficiaries named in the man’s superannuation, the other being the man’s brother. Carbone Lawyers represented the woman in submitting the new claim for Death Benefit, according to the deceased’s wishes.
Surprisingly, the Trustees did not follow the deceased‘s instructions and chose to make the daughter the sole beneficiary of the claim. They also challenged her claim that she was dependent on her father.
The determination of a trustee to deem someone a dependant has significant tax benefits and should be challenged it can be proven otherwise.
The young woman had inherited her father’s mortgage and other liabilities and faced financial ruin should she have to pay a large portion of the death benefit in tax.
Carbone Lawyers made a request for reconsideration and collected evidence of the young woman’s dependency on her father. This involved a forensic examination of both the daughter’s and the deceased’s bank accounts to show that he was paying for expenses such as mortgage repayments, household utilities and groceries, the daughter’s phone bills and student fees.
Outcome:
The Trustees conceded they had erred in their determination, recognised the daughter as her father’s dependant, and paid the death benefit accordingly, which saved the Daughter hundreds of thousands of dollars in tax.