Issue
Is the spouse of the individual specified in a family trust election still a family member after the death of that individual under section 272-95 of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes, the spouse of the deceased "test individual" will continue to be family member under section 272-95 of the ITAA 1936 provided they were the spouse at the time of death. They will cease to be a spouse if they remarry or enter into a defacto relationship.
Facts
A person has a present entitlement to income from a trust which has made a family trust election. They are the widow/er of the individual specified in the family trust election. They were the spouse of the specified individual at the time of that individual's death.
Reasons for Decision
Section 272-95 of the ITAA 1936 provides that: 'The "family" of an individual (the "test individual") consists of all of the following (if applicable): • (a) any parent, grandparent, brother, sister, nephew, niece, child, or child of a child, of: • (i) the test individual; or • (ii) the test individual's spouse; • (b) the spouse of the test individual or of anyone who is a member of the test individual's family because of paragraph (a). Child and spouse are defined in subsection 6(1).' [This definition applies with effect from 7:30 pm by legal time in the Australian Capital Territory on 13 May 1997]
Subsection 6(1) of the ITAA 1936 defines 'spouse' as including 'another person who, although not legally married to the person, lives with the person on a bona fide domestic basis as the husband or wife of the person'.
We consider that where a widow/er was the spouse of a test individual at the time of the test individual's death, the widow/er will be considered to remain the spouse of the test individual within the meaning of section 272-95 of the ITAA 1936 until such time as the widow/er begins to have a new spouse. Therefore, if the person in question enters into a 'marital type' relationship (by either remarrying or entering into a de facto relationship) then at that point in time the person will cease to be the 'spouse' of the deceased test individual. Accordingly, the person would no longer be regarded as a "family" member for the purposes of section 272-95 of the ITAA 1936.