Edited version of private advice

Authorisation Number: 1051989582097

Date of advice: 21 July 2022

Ruling

Subject: Death benefits

Question

Is the Beneficiary a death benefits dependant of the Deceased in accordance with Section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

This ruling applies for the following period:

Income year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The Beneficiary is the child of the Deceased.

The Deceased passed away in early 20XX from terminal illness.

The death benefit payment was made from the Deceased's superannuation fund. It was made directly to the Beneficiary.

The Beneficiary was diagnosed with a disability in 20XX. The Beneficiary has provided a statement from the employer, evidencing approximately a few weeks of personal sick, carers and compassionate after their parent was diagnosed with terminal illness. This was taken to manage her health as well as to take care of the Deceased and her child.

The Beneficiary resided with the Deceased in their primary place of residence after the Deceased's terminal illness diagnosis in early 20XX. The Deceased had a few more admission to hospital during that year, where the Beneficiary was able to stay in her own home, while her parent was being looked after.

The Deceased stayed in respite care in early 20XX, when the Beneficiary was in Hospital for a few days and not able to reside with the Deceased. The respite care was intended for a few weeks, however the Deceased's condition deteriorated. The Deceased was required to stay in residential care due to paralysis, up until the time of death. While at residential care, the Beneficiary was caring for the Deceased, where she would go in every morning to provide support, advocate for and look after the Deceased. She delivered meals and cleaned the Deceased's room.

The Beneficiary and Deceased were both owners of the Deceased's primary place of residence. They sold the property, with the sale proceeds was used for accommodation for the Deceased's room at the Care Facility. The Beneficiary and the Deceased shared a join bank account, covering home loan repayments, proceeds from house sale and expenses for the care facility.

The Deceased did not have a spouse. Therefore, the Beneficiary was the Deceased's primary carer when the Deceased was diagnosed with terminal illness up until time of death. The Beneficiary has also provided evidence that she was on full time leave for a few months to care for her parent.

The Beneficiary provided care for the Deceased including cooking, cleaning, shopping, personal care, transport, attending medical, counselling and hospital treatments, being the Deceased's contact person at Centrelink, writing applications for health care cards, advocacy and ensuring the best possible support.

There is evidence of written communication between the Beneficiary and the residential care facility, where the Beneficiary has advocated for the Deceased' wellbeing during their stay there. She expressed concerns around the Deceased's care (exercise time, cleanliness, medical administration and falls) at the residential care.

Before the Deceased was diagnosed with terminal illness, the Deceased provided domestic and personal care to the Beneficiary when she was initially diagnosed with her disability, taking her to medical appointments and treatment. The Deceased also provided emotional support for the Beneficiary during times of stress even though the Deceased was terminally ill.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 302-195(1)

Income Tax Assessment Act 1997 Paragraph 302-195(1)(c)

Income Tax Assessment Act 1997 Subsection 302-200(1)

Income Tax Assessment Act 1997 Paragraph 302-200(1)(a)

Income Tax Assessment Act 1997 Paragraph 302-200(1)(b)

Income Tax Assessment Act 1997 Paragraph 302-200(1)(c)

Income Tax Assessment Act 1997 Paragraph 302-200(1)(d)

Income Tax Assessment Act 1997 Subsection 302-200(2)

Income Tax Assessment Act 1997 Paragraph 302-200(3)(a)

Income Tax Assessment Act 1997 Section 302-200

Income Tax Assessment Act 1997 Section 995-1(1)

Income Tax Assessment Regulations 1997 Regulation 302-200.01(2)

Income Tax Assessment Regulations 1997 Regulation 302-200.02

All references are to the Income Tax Assessment Act 1997 unless otherwise stated

Reasons for decision

Summary

An interdependency relationship as defined under subsection 302-200 (1) of the ITAA 1997 existed between the Deceased and the Beneficiary just before the Deceased died. Therefore, in relation to the death benefit paid to the estate of the Deceased to which the Beneficiary is entitled to receive, the Beneficiary is considered a death benefits dependant of the Deceased as defined in subsection 302-195(1) of the ITAA 1997.

Detailed reasoning

Death Benefits Dependant in relation to the Superannuation Death Benefit

Subsection 995-1 (1) of the ITAA 1997 states that the term 'death benefits dependant' has the meaning given by section 302-195 of the ITAA 1997.

Subsection 302-195(1) of the ITAA 1997 defines a death benefits dependant as follows:

(1) A death benefits dependant, of a person who has died, is:

(a)  the deceased person's spouse or former spouse; or

(b)  the deceased person's *child, aged less than 18; or

(c)   any other person with whom the deceased person had an interdependency relationship under section 302-200 just before he or she died; or

(d)  any other person who was a dependant of the deceased person just before he or she died.

The facts of this case demonstrate that paragraphs 302-195(1)(a) or 302-195(1)(b) of the ITAA 1997 do not apply to the Beneficiary

Therefore, we will determine if the Beneficiary was a dependant of the deceased person just before he or she died in accordance with paragraph 302-195(1)(c) or 302-195(1)(d).

What is an interdependency relationship?

Subsection 302-200(1) of the ITAA 1997 states that two persons (whether related by family) have an interdependency relationship if:

(a)  they have a close personal relationship; and

(b)  they live together; and

(c)   one or each of them provides the other with financial support; and

(d)  one or each of them provides the other with domestic support and personal care.

Subsection 302-200(2) of the ITAA 1997 states, in addition, 2 persons (whether or not related by family) also have an interdependency relationship under this section if:

(a)  they have a close personal relationship; and

(b)  they do not satisfy one or more of the requirements of an interdependency relationship mentioned in paragraphs (1(b), (c) and (d) and

(c)   the reason they do not satisfy those requirements is that either or both suffer from a physical, intellectual or psychiatric disability

Subsection 302-200(3) of the ITAA provides that the regulations may specify:

(a)  matters that are, or are not, to be taken into account in determining under subsection (1) or (2) whether 2 persons have an interdependency relationship: and

(b)  circumstances in which 2 persons have, or do not have, an interdependency relationship

To assist in determining whether two persons have an interdependency relationship, paragraph 302-200(3)(a), states that the regulations may specify the matters that are, or are not, to be taken into account.

Subregulation 302-200.01(2) of the Income Tax Assessment Regulations 1997 (ITAR 1997) states the matters to be taken into account are as follows:

(a) all of the circumstances of the relationship between the persons, including (where relevant):

(i) the duration of the relationship; and

(ii) whether or not a sexual relationship exists; and

(iii) the ownership, use and acquisition of property; and

(iv) the degree of mutual commitment to a shared life; and

(v) the care and support of children; and

(vi) the reputation and public aspects of the relationship; and

(vii) the degree of emotional support; and

(viii) the extent to which the relationship is one of mere convenience; and

(ix) any evidence suggesting that the parties intend the relationship to be permanent.

All the conditions already specified in subsection 302-200(1) of the ITAA 1997 or alternatively in subsection 302-200(2) of the ITAA 1997, must be satisfied for a person to be in an interdependency relationship.

Close personal relationship

The first requirement to be met is specified in paragraph 302-200(1)(a). It states that two persons (whether or not related by family) must have a 'close personal relationship'.

This requirement is common to all of the tests specified in section 302-200 and regulation 302-200.02 of the ITAR 1997.

A detailed explanation of subsection 302 200(1) of the ITAA 1997 is set out in the Supplementary Explanatory Memorandum (SEM) to the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004. In discussing the meaning of 'close personal relationship' the SEM, as far as relevant, states:

2.12 A close personal relationship will be one that involves a demonstrated and ongoing commitment to the emotional support and well-being of the two parties.

2.13 Indicators of a close personal relationship may include:

•         the duration of the relationship;

•         the degree of mutual commitment to a shared life;

•         the reputation and public aspects of the relationship (such as whether the relationship is publicly acknowledged).

2.14 The above indicators do not form an exclusive list, nor are any of them a requirement for a close personal relationship to exist.

2.15 It is not intended that people who share accommodation for convenience (e.g. flatmates), or people who provide care as part of an employment relationship or on behalf of a charity should fall within the definition of close personal relationship.

In the explanatory statement to the Income Tax Amendment Regulations 2005 (No. 7) which inserted Regulation 8A into the ITR 1936, it stated that:

'It is not necessary for each of the listed circumstances to be satisfied in order for an interdependency relationship to exist. There are circumstances in which it would be inappropriate to consider certain matters. For example, it would not be relevant to consider whether there was a sexual relationship when determining whether an interdependency relationship existed between siblings.

Each of the matters listed is to be given the appropriate weighting under the circumstances. The degree to which any matter is met or is present or not, as the case may be, does not necessarily of its own accord, confirm or preclude the existence of an interdependency relationship.

Generally speaking, it is not expected that children will be in an interdependency relationship with their parents.'

While this statement in the ES does not absolutely preclude a child from being in an interdependency relationship with a parent it does suggest that it will only exist where there are aspects to the relationship that go beyond what would usually be observed in such a situation.

Given that the Deceased was an adult parent at the time of death, the Deceased and the Beneficiary had of course known each other for some time. However, the 'duration of a relationship' in and of itself is not sufficient to categorize a relationship as 'close and personal.' The other considerations must also be taken into account.

Of particular importance in this case are the related matters outlined in paragraphs (iv), (viii) and (ix) of subregulation 302-200.01(2) of the ITAR 1997. The facts in this case indicate that the relationship between the Deceased and the Beneficiary was above that of a normal family relationship.

Specifically, the facts provided in this case indicate that there would be a mutual commitment to a shared life between the Deceased and the Beneficiary. The Beneficiary provide the Deceased with ongoing support that was enduring in nature. Due to the Deceased's illness, the Beneficiary had taken a few weeks of personal sick, carers and compassionate leave as well as a few months of full time leave to take care of the Deceased a year before time of death. The Deceased did not have a spouse, therefore the Beneficiary was the parent's primary carer. They resided together when the Deceased was diagnosed with terminal illness and the Beneficiary visited the Deceased daily after their admission to respite care a year after. The Beneficiary advocated on the parent's behalf surrounding their care in the residential care centre. There was an ongoing commitment by the Beneficiary to ensure the well-being of the Deceased and provide the Deceased with emotional support. The Beneficiary also had a disability, and they provided each other with emotional support even when the Deceased was terminally ill.

The degree of support outlined in your contentions must be considered in accordance with paragraph (vii) of subregulation 302-200.01(2) of the ITAR 1997. It is acknowledged that the degree of emotional support provided by the Beneficiary to the Deceased is significant, and goes beyond the level of emotional support that would typically be expected in a relationship between a parent and child. As such, a consideration of paragraph (vii) of subregulation 302-200.01(2) of the ITAR 1997 sufficiently differentiates the situation in this case from others involving a parent and child

In this case, the Beneficiary is the child of the Deceased. It is clear that a close family relationship existed prior to, and at the time of the Deceased's death. The Beneficiary lived with the Deceased in the family home prior to the Deceased's relocation to residential care., The Beneficiary took full time leave in order to care for the Deceased when living together. While the Deceased was in residential care and paralysed, the Beneficiary visited the parent daily, providing support, and advocating and looking after the parent. She delivered meals and cleaned the parent's room.

The Beneficiary and the Deceased clearly remained an important part of each other's lives and were committed to a shared life together. The Deceased suffered from ill health as a result of the terminal illness. The Beneficiary also had a disability and had emotional support from the Deceased even when the Deceased was terminally ill.

It is considered that due to the tragic personal circumstances in this case, including the Deceased's paralyses, the relationship between the Deceased and the Beneficiary was above and beyond what would be expected for a parent and child.

In view of the above it is considered that a close personal relationship existed as envisaged by paragraph 302-200(1)(a) of the ITAA 1997.

Accordingly, paragraph 302-200 (1)(a) of the ITAA 1997 has been satisfied.

Living together

The Deceased and the Beneficiary were living together when the Deceased was diagnosed with terminal illness.

A year after the diagnosis, the Deceased was living in respite and subsequently residential care, as the Deceased's condition was deteriorating and suffered from paralysis.

While the Deceased and the Beneficiary were not living together at the time of the Deceased's death, this was only due to the ongoing physical and intellectual disability of the Deceased, and the Deceased's need for full-time care.

Consequently, it is considered that paragraph 302-200(1)(b) has been satisfied in this instance.

Financial support

Financial support under paragraph 302-200(1)(c) of the ITAA 1997 is satisfied if some level (not necessarily substantial) of financial support is being provided by one person (or each of them) to the other.

In this case, the facts indicate that the Beneficiary provided financial support by using the sale proceeds from their joint property, for accommodation for the Deceased's room at the residential care facility. They also shared a joint bank which included home loan repayments, proceeds from house sale and expenses for the care facility.

Therefore, the requirement specified in paragraph 302-200(1) (c ) of the ITAA 1997 has been satisfied in this instance

Domestic support and personal care

In discussing the meaning of domestic support and personal care, paragraph 2.16 of the SEM states:

Domestic support and personal care will commonly be of a frequent and ongoing nature. For example, domestic support services will consist of attending to the household shopping, cleaning, laundry and like services. Personal care services may commonly consist of assistance with mobility, personal hygiene and generally ensuring the physical and emotional comfort of a person.

In this case, the Beneficiary provided the Deceased with ongoing domestic care, personal care, and emotional support to help them cope with their long-time illness. The fact that the Beneficiary took leave to take care of the Deceased substantiates this. The Beneficiary also advocated on the Deceased's behalf at the residential care, to ensure the Deceased was taken care of properly.

It is therefore considered that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied.

Conclusion

Conditions specified in paragraphs 302-200(1)(a), (b), (c) and (d) have been satisfied.

The Beneficiary and Dependant are considered to be in an interdependency relationship as all of the conditions already specified in subsections 302-200(2) of the ITAA 1997 have been met.

As the Beneficiary is a death benefits dependant of the Deceased under paragraph 302 195(1)(c) of the ITAA 1997,as such, there is no need to consider whether the Beneficiary is a dependant of the Deceased under paragraph 302 195(1)(d) of the ITAA 1997.

Therefore the Beneficiary is a death benefits dependent of the Deceased for the purposes of section 302-195 of the ITAA 1997.