Edited version of private advice

Authorisation Number: 1051830499594

Date of advice: 14 May 2021

Ruling

Subject: Superannuation death benefit

Question

Did an interdependency relationship exist between the Deceased and their mother (your client) 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

Your client was the mother of the Deceased.

Your client is the administrator of the Deceased estate.

The Deceased did not have a binding death benefit nomination in place with their superannuation fund(s).

Your client did not have a spouse.

The Deceased did not have a spouse.

The Deceased lived independently until, they returned to live with your client.

During this time your client and the Deceased both provided each other the following assistance:

•         sharing household expenses, such as grocery expenses, and utility (electricity, gas and water) bills; and

•         general household maintenance including house cleaning.

From approximately 20XX onwards, the Deceased worked intermittently in a temporary capacity. During this time of intermittent employment, your client provided financial support to the Deceased by:

•         wholly paying for household expenses;

•         assisting with repaying the Deceased's liabilities; and

•         providing spending money for the Deceased to purchase personal items.

On 1 July 20XX, the Deceased was diagnosed with a terminal illness, and ceased employment. The Deceased developed mental health issues during this time.

During this time after the diagnosis, your client provided the Deceased with ongoing personal care on a daily basis, including:

•         constant emotional support for the Deceased during the last six weeks of their life; and

•         assisting the movement of the Deceased, who's terminal illness had restricted them to a wheelchair.

On XX Month 20XX the Deceased passed away at the age of XX due to a severe multiple organ failure.

The deceased was a member of three different superannuation funds.

The three superannuation funds paid superannuation death benefits to the deceased estate.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 302-10

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

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

Income Tax Assessment Act 1997 section 302-200

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 Regulations 1997 Subregulation 302-200.01(2)

Income Tax Assessment Regulations 1997 Regulation 302-200.02

Reasons for decision

Summary

An interdependency relationship as defined under subsection 302-200(1) existed between the Deceased and your client just before the Deceased died.

Therefore, in relation to the death benefit paid to the estate of the Deceased, the Deceased is a death benefits dependant of your client as defined in subsection 302-195(1).

Detailed reasoning

Superannuation death benefits paid to the trustee of a deceased estate

A payment made by a superannuation fund to a deceased estate after the death of the deceased is assessed as a death benefit under section 302-10.

The taxation arrangements that apply to this superannuation death benefit are determined in accordance with the taxation arrangements that would otherwise apply to the person or persons otherwise intended to benefit from the estate.

For example, where a dependant of the deceased receives part, or all of, a superannuation death benefit and has benefited, or is expected to benefit, the trustee will not be subject to tax on that part of the benefit paid to the dependant as if it were paid to a dependant of the deceased.

Death benefits dependant

Subsection 302-195(1) defines a death benefits dependant as follows:

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.

In this case, the facts show that for the purposes of subsection 302-195(1) the relevant provision that needs to be satisfied is paragraph 302-195(1)(c). That is, an interdependency relationship needs to be established between the Deceased and your client just before the Deceased passed away.

Interdependency relationship

Under subsection 302-200(1) an interdependency relationship is defined as:

Two persons (whether or not related by family) have an interdependency relationship under this section 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) 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 of them suffer from a physical, intellectual or psychiatric disability.

Accordingly, all of the conditions in subsection 302-200(1), or alternatively subsection 302-200(2), must be satisfied for a person to be in an interdependency relationship with another person.

Relevantly in this case, focus will be on whether an interdependency relationship existed with another person(s) under subsection 302-200(1).

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.

Close personal relationship

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

In accordance with regulation 302-200.02 of the ITAR 1997, two persons have an interdependency relationship if they satisfy the requirements of paragraphs 302-200(1)(a) to (c) of the ITAA 1997 and one or each of them provides the other with support and care of a type and quality normally provided in a close personal relationship, rather than a mere friend or flatmate. For example, significant care provided to another person when they are unwell or when they are suffering emotionally.

Generally, 'a close personal relationship' as specified in subsection 302-200(1) would not exist between a parent and a child. This is because the relationship between a parent and a 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).

In this case, it is considered that the relationship between the Deceased and your client was over and above that of a normal family relationship, and beyond what might be expected of a friend or flatmate. A close personal relationship existed as required by paragraph 302-200(1)(a).

The matters that indicate that the Deceased and your client had a close personal relationship are:

•         the Deceased lived with your client for 24 years;

•         significant personal and emotional support provided to the Deceased by your client during the time the Deceased suffered from a serious illness; and

•         the fact that the Deceased had no dependants.

Living together

The second requirement to be met is specified in paragraph 302-200(1)(b), and states that the two persons live together.

The facts in this case show that the Deceased and your client were living together at the time of the Deceased's death and accordingly paragraph 302-200(1)(b) has been satisfied in this instance.

Financial support

The third requirement to be met is specified in paragraph 302-200(1)(c), and states that one or each of them provides the other with financial support.

Financial support under paragraph 302-200(1)(c) 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 Deceased and your client assisted each other with the cost of living expenses, utilities, as well as general financial support as required.

It is therefore considered that paragraph 302-200(1)(c) has been satisfied.

Domestic support and personal care

The fourth requirement to be met is specified in paragraph 302-200(1)(d) and states that one or each of these two persons provides the other with domestic support and personal care.

For the purposes of paragraph 302-200(1)(d) 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 activities. Personal care service may consist of assistance with mobility, personal hygiene and generally ensuring the physical and emotional comfort of a person.

From the facts provided, your client and the Deceased both provided each other domestic care in the form of home cleaning and maintenance. As well as this, your client provided the Deceased with significant emotional and physical support during the period the Deceased was terminally ill.

It is considered that the requirement in paragraph 302-200(1)(d) has been satisfied in this instance.

Conclusion

The Deceased and your client had an interdependency relationship within the meaning of subsection 302-200(1).