Relatives are defined in both Section 10 (1) and Section 17A of SISA. Section 10 (1) definition is relevant in determining who is a related party of the SMSF and whether an SMSF is providing financial assistance. Relatives in Section 17A are in relation to the fund structure in order to meet the definition of a self-managed super fund. This post only discusses the section 10 definition.
Section 10 (1) defines a relative to be the following:
(a) parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendant, adopted child of an individual, or of his or her spouse
(b) spouse and spouse of anyone in paragraph (a)
Lineal descendant is a blood relative in the direct line of descent – the children, grandchildren, grand-grandchildren.
Anyone by common sense a relative is generally a relative in Section 10, except cousins, grand-grandparents, children of nephews and nieces. Former spouses are also not relatives.
The definition also has a fine print referring to Section 10 (5), which stretched the definition above and created an extended big family.
Section 10 (5) states: for the purposes of paragraph (a) of the definition of relative in subsection (1), if one individual is the child of another individual because of the definition of child in subsection (1), relationships traced to, from or through the individual are to be determined in the same way as if the individual were the natural child of the other individual.
Section 10 (5) assumes anyone by definition a child is a natural child, and trace relationships to, from and through this individual as if she or he was a natural child. Fundamentally it triggers reconsideration of almost everyone in paragraph (a). For example, a stepchild is by definition a child, your stepchild is child, your brother’s stepchild is his child, therefore your nephew. The definition of child complicates the definition of relative.
Section 10 (1) defines child, in relation to a person, to include
(a) an adopted child, a stepchild or an ex-nuptial child of the person; and
(b) a child of the person’s spouse; and
(c) someone who is a child of the person within the meaning of the Family Law Act 1975
Adopted child is defined in section 10 (1). An adopted child, in relation to a person, means a person adopted by the first-mentioned person:
(a) under the law of a state or territory relating to the adoption of children, or
(b) under the law of any other place relating to the adoption of children, if the validity of the adoption would be recognised under the law of any state or territory.
Stepchild is not defined in SIS. At common law, a stepchild means a child of a husband or wife by a former marriage. There are many cases dealing with issues relating to a stepchild. A person ceased to be a stepchild to the step-parent when their natural parent ends the marriage to the step-parent. The stepchild step-parent relationship also severs when the natural parent dies.
A child of a person’s spouse also automatically qualifies as a child of the person. Paragraph (b) in the definition of child recognises child of an opposite or same-sex de facto partner by a former relationship, without needing to be an adopted child or a stepchild.
Family Law Act also has extensive definition of child. The key impact on SIS is to recognise child from surrogacy arrangement; and to recognise child from an artificial conception procedure in a de facto relationship.