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Edited version of private advice
Authorisation Number: 1051831137624
Date of advice: 6 May 2021
Subject: Death benefits - interdependency
Was the Beneficiary a death benefits dependant as defined in section 302-195 of the Income Tax Assessment Act 1997 of the Deceased?
This ruling applies for the following period:
The income year ending 30 June 2020
The scheme commences on:
1 July 2019
Relevant facts and circumstances
1. The Beneficiary is an adult child and Beneficiary of the Deceased.
2. The Beneficiary has resided with the Deceased most of their life.
3. The Deceased provided the Beneficiary with continued financial, domestic, transportation and emotional support.
4. The Deceased and the Beneficiary supported each other and planned to continue to reside together and support one another through life.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 302-195.
Income Tax Assessment Act 1997 Section 302-200.
Income Tax Assessment Regulations 1997 Regulation 302-200.01.
Reasons for decision
An interdependency relationship as defined under subsection 302-200(1) of the Income Tax Assessment Act 1997 (ITAA 1997) existed between the Deceased and the Beneficiary as all of the requirements which are set out in the relevant legislation have been satisfied.
Therefore, the Beneficiary is considered to be a death benefits dependant of the Deceased.
Superannuation death benefits
Division 302 of the ITAA 1997 sets out the taxation arrangements that apply to the payment of superannuation death benefits. These arrangements depend on whether the person that receives the superannuation death benefit is a dependant of the deceased and whether the amount is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit.
Where a person receives a superannuation death benefit and that person was a dependant of the deceased, it is not assessable income and is not exempt income.
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 of a person who has died as:
(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 just before he or she died.
As the Beneficiary is a child of the Deceased aged over 18, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 do not apply. Therefore, to conclude that the Beneficiary is a death benefits dependant of the Deceased, it must be established that the Beneficiary had an 'interdependency relationship' with the Deceased or that they were a 'dependant' of the Deceased just before the Deceased died.
What is an interdependency relationship?
Subsection 302-200(1) of the ITAA 1997 states that two persons (whether or not 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(3) of the ITAA 1997 provides that 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 that effect, regulation 302-200.01 of the Income Tax Assessment Regulation 1997 (ITAR 1997) states that in considering paragraph 302-200(3)(a) of the ITAA 1997, matters to be taken into account are all relevant circumstances of the relationship between the persons, including (in this case):
• the duration of the relationship; and
• the ownership use and acquisition of property; and
• the degree of mutual commitment to a shared life; and
• the degree of emotional support; and
• the extent to which the relationship is one of mere convenience; and
• any evidence suggesting that the parties intend the relationship to be permanent.
Close personal relationship
The first requirement to be met is specified in paragraph 302-200(1)(a) of the ITAA 1997. It states that two persons (whether or not related by family) must have a 'close personal relationship'.
A close personal relationship is generally one that involves a demonstrated and ongoing commitment to the emotional support and well-being of the two parties. Indicators of a close personal relationship may include the duration of the relationship and the degree of mutual commitment to a shared life.
Generally, a close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not exist between a parent and child. This is because the relationship between a parent and child would be expected to change significantly over time and there would be no mutual commitment to a shared life between the two. However, where, as in this case, unusual and exceptional circumstances exist, a relationship between a parent and child may be treated as an interdependency relationship for the purposes of subsection 302-200(1) of the ITAA 1997.
In this case, it is considered that the relationship between the Beneficiary and the Deceased was over and above that of a normal family relationship and that a close personal relationship existed as required by paragraph 302-200(1)(a) of the ITAA 1997.
The matters that indicate that the Beneficiary and the Deceased had a close personal relationship prior to the Deceased's death are:
• the Beneficiary had lived with the Deceased most their life never married and had no
• the Deceased provided the Beneficiary with emotional support with their illness as well as when attending medical and other appointments.
The second requirement to be met is specified in paragraph 302-200(1)(b) of the ITAA 1997 and states that two persons live together. It is considered in the context of the provision, that the living arrangements must have some degree of permanency.
In determining if the persons live together it is relevant to have regard to 'the degree of mutual commitment to a shared life' and 'any evidence suggesting that the parties intend the relationship to be permanent'. In this case, an adult child (Beneficiary) has lived with a parent most of their life.
The child has never had employment and had not intended to permanently reside in any other means of accommodation. This can be considered that the Beneficiary has, in fact, committed to a shared life with the parent and they intended the relationship to be permanent.
Therefore, it is considered that the Beneficiary and the Deceased lived together.
The third requirement to be met is specified in paragraph 302-200(1)(c) of the ITAA 1997, and states that one or each of the two persons provides the other with 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 was provided by one person (or each of them) to the other, for example providing support for a person's household and/or medical expenses. In this case, the facts indicate that the Deceased provided complete financial support to the Beneficiary, paying for all household expenses such as utility bills, council rates, water rates, medical bills, vet bills, grocery and other household bills. Therefore, financial support under paragraph 302-200(1)(c) of the ITAA 1997 is satisfied.
Domestic support and personal care
The fourth requirement to be met is specified in paragraph 302-200(1)(d) of the ITAA 1997, and states that one or each of these two persons provides the other with domestic support and personal care.
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 the case the Deceased provided domestic and personal care to the Beneficiary on an ongoing basis. Shopping and household duties were shared between them and the Deceased transported and assisted the Beneficiary to all medical appointments.
It is therefore considered that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied in this instance.
Based on the above, the Beneficiary meets all the requirements of an interdependency relationship for the purposes of subsection 300-200(1) 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.
Consequently, it is not necessary to consider whether the Beneficiary is a dependant of the deceased under paragraph 302-195(1)(d) of the ITAA 1997