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Edited version of private advice

Authorisation Number: 1051981208692

Date of advice: 1 June 2022

Ruling

Subject: Superannuation - death benefits dependant

Question

Was the Beneficiary a death benefits dependant of the Deceased according to section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997), due to being in an interdependency relationship with the Deceased under section 302-220 of the ITAA 1997?

Answer

No

This ruling applies for the following period:

Year ended 30 June 2021

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect, and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The Deceased was a sole parent.

The Deceased was admitted to hospital, where she passed away some months later.

The Deceased Estate received a death benefit payment.

The Beneficiary is an adult child of the Deceased.

The Beneficiary had always lived with the Deceased in the family home.

The Beneficiary was in employment when the Deceased died.

It was stated that the Beneficiary contributed to household expenses by way of grocery shopping and paying household bills.

It was stated that the Beneficiary provided domestic support and personal care to the Deceased in the form of:

•         preparation of meals

•         weekly house cleaning

•         gardening

•         caring for the family pet

•         caring for a minor sibling

•         transport and accompaniment to doctor and hospital appointments

•         recreational day trips

•         regular laundering of her clothes (including whilst she was in hospital)

It was stated that the Beneficiary provided emotional support to the Deceased by:

•         daily hospital visits, including weekends and rostered days off

•         ensuring that as much time as possible was spent doing activities together that she enjoyed

•         providing relief from the stress of her illness

It was stated that the Beneficiary encouraged the Deceased to open-up and discuss her worries with him.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 302-145

Income Tax Assessment Act 1997 Section 302-195

Income Tax Assessment Act 1997 Section 302-200

Income Tax Assessment Regulations 2021 Regulation 302-200

Other relevant documents

Supplementary Explanatory Memorandum (SEM) to the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004

Explanatory Statement to the Income Tax Amendment Regulations 2005 (No.7)

Reasons for Decision

Detailed reasoning

Meaning of death benefits dependant

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:

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;

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.

As the Beneficiary is the adult child of the Deceased, paragraphs 302-195(1)(a) and (b) are not applicable.

The definition of death benefits dependant does not stipulate the nature or degree of dependency required to be a dependant of the deceased person in paragraph 302-195(d) of the ITAA 1997. However, it is generally accepted that this paragraph refers to financial dependence.

The Beneficiary was not financially dependent on the Deceased person and therefore, paragraph 302-195(d) is not applicable.

To meet the definition of a death benefits dependant, the Beneficiary must have been in an interdependency relationship with the Deceased, in accordance with paragraph 302-195(1)(c) of the ITAA 1997.

Interdependency relationship

Under subsection 302-200(1) of the ITAA 1997, an interdependency relationship is defined as:

Two persons (whether related by family or not) 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) of the ITAA 1997 states:

In addition, 2 persons (whether related by family or not) 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.

To assist in determining whether two people have an interdependency relationship, paragraph 302-200(3)(a) of the ITAA 1997 provides that the regulations may specify the matters that are or not taken into account.

Subregulation 302-200.01(2) of the Income Tax Assessment Regulations 2021 (ITAR 2021) states the matters taken into account are as follows: 1997 (ITAR 1997)

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

•         the duration of the relationship

•         the ownership, use and acquisition of property

•         the degree of mutual commitment to a shared life

•         the care and support of children

•         the reputation and public aspects of the relationship

•         the degree of emotional support

•         the extent to which the relationship is one of mere convenience

•         any evidence that the parties intend the relationship to be permanent; and

b)    the existence of a statutory declaration signed by one of the persons to the effect that the person is, or (in the case of a statutory declaration made after the end of the relationship) was in an interdependency relationship with the other person.

Paragraph 302-200(3)(b) of the ITAA 1997 states that the regulations may specify the circumstances in which two people have, or do not have an interdependency relationship.

Regulation 302-200.02 of the ITAR 2021 sets out the circumstances in which two people have an interdependency relationship.

Subregulation 302-200.02(2) of the ITAR 2021 provides that an interdependency relationship exists between two people where:

a)    they satisfy the requirements of paragraphs 302-200(1)(a) to (c) of the ITAA 1997; and

b)    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 by a mere friend or flatmate, for example one person provides significant care for the other person when they are unwell or suffering emotionally.

Subregulations 302-200.02(3) and (4) of the ITAR 2021 provide that an interdependency relationship also exists between two people where:

a)    they have a close personal relationship; and

b)    they do not satisfy the other requirements set out in subsection 302-200(1) of the ITAA 1997 because:

they are temporarily living apart, for example because one of them is temporarily working overseas or in gaol; or

one (or both) of them suffers from a disability.

Subregulation 203-200.02(5) of the ITAR 1997 states that two persons do not have an interdependency relationship if one of them provides domestic support and personal care to the other:

a)    under an employment contract or a contract for services; or

b)    on behalf of another person or organisation such as a government agency, a body corporate or a benevolent or charitable organisation.

All the conditions in subsection 302-200(1) of the ITAA 1997, or alternatively, subsection 302-200(2) of the ITAA 1997, or one of the tests in regulation 302-200.02 of the ITAR 2021 must be satisfied for a person to be in an interdependency relationship with another person. We deal with each condition in turn, to establish if an interdependency relationship existed.

Close personal relationship

The first requirement to be met is specified in paragraph 302-200(1)(a) of the ITAA 1997, which states that the two persons (whether related by family or not) must have a close personal relationship.

This requirement is common to all the tests specified in section 302-200 of the ITAA 1997 and regulation 302-200.02 of the ITAR 2021.

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, which states:

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.

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).

The above indicators are not an exclusive list and none of them are required for a close personal relationship to exist.

People who share accommodation for convenience (such as flatmates) or people who provide care as part of an employment relationship or on behalf of a charity are not intended to fall within the definition of a close personal relationship.

The Explanatory Statement to the Income Tax Amendment Regulations 2005 (No.7) stated that:

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

While this statement does not preclude a child from being in an interdependency relationship with a parent, it suggests that interdependency only exists where the relationship goes beyond the usual relationship between an adult child and a parent.

A close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not normally exist between a parent and an adult child because there would not be a mutual commitment to a shared life between the two. In addition, the relationship between parents and their adult children would be expected to change significantly over time. It would be expected that the adult child would eventually move out and secure independence from their parents.

However, where unusual and exceptional circumstances exist, a relationship between a parent and an adult child may be treated as an interdependency relationship for the purposes of subsection 302-200(1) of the ITAA 1997.

The relationship between the Beneficiary and the Deceased was not over and above a normal family relationship between a parent and an adult child.

While the Beneficiary provided the Deceased with emotional and domestic support during her illness, the level of care provided did not exceed the care and comfort that would usually be provided by an adult child to a parent in such a situation.

The Beneficiary lived in the family home with the Deceased and two other siblings as part of a family unit, but there is no indication of the existence of a strong mutual commitment to having a shared life.

Therefore, a close personal relationship did not exist between the Beneficiary and the Deceased and the first requirement specified in paragraph 302-200(1)(a) of the ITAA has not been satisfied in this case.

Living together

The second requirement to be met is specified in paragraph 302-200(1)(b) of the ITAA 1997 and states that two interdependent persons (whether or not related by family) live together.

The term 'live' is not defined in the ITAA 1997 or accompanying regulations. According to the Macquarie Dictionary, the term 'live' means to dwell or reside. The term 'reside' is defined as the action of dwelling in a particular place permanently or for a considerable time. In the context of paragraph 302-200(1)(b), the living arrangements must have some degree of permanency that is only disturbed by the death of one of the persons.

Prior to the Deceased's death, the Beneficiary lived with the Deceased.

Consequently, the requirement specified in paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied in this case.

Financial support

The third requirement to be met is specified in paragraph 302-200(1)(c) of the ITAA 1997, which states that one or each of these 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 of financial support (not necessarily substantial) is being provided by one person (or each of them) to the other.

Prior to the Deceased's illness, both the Beneficiary and the Deceased were employed. No evidence has been provided to support the statement that either provided the other with financial support.

Consequently, paragraph 302-200(1)(c) of the ITAA 1997 has not been satisfied.

Domestic support and personal care

The fourth requirement to be met is specified in paragraph 302-200(1)(d) of the ITAA 1997, which states that one or each of these two persons provides the other with 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.

The Beneficiary provided domestic support and personal care to the Deceased during her illness and hospitalisation. This was not of a frequent and ongoing nature.

Therefore, the requirement in paragraph 302-200(1)(d) has not been satisfied.

Conclusion

As all the requirements in section 302-200 of the ITAA 1997 have not been satisfied, the Deceased and the Beneficiary were not in an interdependency relationship in the period just before the Deceased's death.

As the Beneficiary was not in an interdependency relationship with the Deceased, the Beneficiary is not a death benefits dependant as defined under section 302-195 of the ITAA 1997.