Edited version of private ruling

Authorisation Number: 1011839528938

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Ruling

Subject: Superannuation death benefit - dependency

Questions

1. Was the Deceased in an interdependency relationship with you in accordance with section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997)?

2. Are you a death benefits dependant of the Deceased in accordance with section 302-195 of the ITAA 1997?

Advice/Answers

1. No

2. Yes

This ruling applies for the following period

Year ending 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

The Deceased passed away overseas during the 2010-11 income year.

You are the executor of the Deceased's will.

You are in the process of distributing the Deceased's assets in accordance with the Deceased's will.

You are the main beneficiary of the Deceased's will.

You were the Deceased's sole partner for a period of over five years.

You state that in that period you and the Deceased were a couple and in a de facto relationship.

During that period you and the Deceased were dependant on each other and had purchased a property and built a house, in which you lived together.

The house was sold when you separated from the Deceased over five years ago, at which time the Deceased went to work overseas.

You and the Deceased were not living together at the time of the Deceased's death

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 302-195.

Income Tax Assessment Act 1997 Section 302-200.

Income Tax Assessment Act 1997 Subsection 995-1(1).

Income Tax Regulations 1997 Regulation 302-200.01(2)

Reasons for decision

Summary

You and the Deceased were not in an interdependency relationship because you were not living together at the time of the Deceased's death.

However, you were the Deceased's sole partner for a period of over five years. During that period you and the Deceased were a couple and in a de facto relationship.

As you and the Deceased were in a de facto relationship, you are considered to be the Deceased's de facto spouse during that period. Hence you are a former spouse and consequently a death benefits dependant of the Deceased.

Detailed reasoning

Death Benefits Dependant in relation to a Superannuation 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 Income Tax Assessment Act 1997 (ITAA 1997) states that the term 'death benefits dependant' has the meaning given by section 302-195. Section 302-195 of the ITAA 1997 defines death benefits dependant as follows:

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

· the deceased person's spouse or former spouse; or

· the deceased person's child, aged less than 18; or

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

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

In 2008, the government passed legislation to ensure that same-sex couples and families are treated the same way as other couples and families for income tax and superannuation purposes.

The legislation expanded key terms such as 'spouse' and 'child' to recognise the relationships of same-sex couples and their children.

The definitions of 'spouse' or 'former spouse' to be used are those which are operational at the time the payment is made and the facts to which the definition is to be applied is not constrained by the date of operation of the amended definition.

In this case, the death benefit will be paid after the legislative changes which occurred on 15 December 2008. As the death benefit is to be paid by the superannuation fund in the 2010-11 income year, it is the legislation applicable in the 2010-11 income year under which your taxable income is to be determined.

De facto relationship

Family relationships are clarified under section 960-255 of the ITAA 1997. The relationship between couples who are not married is treated in the same way as if they are legally married if one individual is the spouse of another because of the definition of spouse in subsection 995-1(1).

A 'spouse' is defined in subsection 995-1(1) of the ITAA 1997 as follows:

Spouse of an individual includes:

· another individual (whether of the same sex or a different sex) with whom the individual is in a relationship that is registered under a State law or Territory law prescribed for the purposes of section 22B of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section; and

· another individual who, although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple.

A deceased person's de facto spouse is therefore included in this definition of 'death benefits dependant' in paragraph 302-195(1)(b) of the ITAA 1997.

In this case you were the Deceased's sole partner for a period of over five years. You state that in that period you and the Deceased were a couple and in a de facto relationship. Further, the facts show that during that period you and the Deceased were dependant on each other and had purchased a property and built a house in which you lived together. Therefore, during that period it is considered that you were living with the Deceased on a genuine domestic basis in a relationship as a couple.

As you and the Deceased were in a de facto relationship, you are considered to be the Deceased's de facto spouse during that period. Hence you are a former spouse of the Deceased in accordance with the definition of a death benefits dependant under section 302-195 of the ITAA 1997.

We will also consider whether you and the Deceased were in an interdependency relationship.

Interdependency relationship

The term interdependency relationship is defined in section 302-200 of the ITAA 1997. Section 302-200 of the ITAA 1997 states:

Subject to subsection (3), for the purposes of this Subdivision, 2 persons (whether or not related by family) have an 'interdependency relationship' if:

· they have a close personal relationship; and

· they live together; and

· one or each of them provides the other with financial support; and

· one or each of them provides the other with domestic support and personal care.

In addition, 2 person (whether or not related by family) also have an interdependency relationship under this section if:

· they have a close personal relationship; and

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

· the reason they do not satisfy the other requirements is that either or both of them suffer from a physical, intellectual or psychiatric disability;

· The regulations may specify:

· 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 under this section; and

· circumstances in which 2 persons have, or do not have, an interdependency relationship under this section.

All of the conditions in subsection 302-200(1) of the ITAA 1997, or alternately both the condition in paragraph 302-200(1)(a) and the condition in subsection 302-200(2), of the ITAA 1997 must be satisfied for you to be able to claim that you had an interdependency relationship.

Cohabitation

One of the requirements to be met is specified in paragraph 302-200(1)(b) of the ITAA 1997, and states that two persons live together.

The third edition of the Macquarie Dictionary (2000 multimedia edition) in its definition of 'live' lists:

24. live together, ... cohabit.

The Macquarie Dictionary defines 'cohabit' as:

2. to dwell or reside in company or in the same place.

The Macquarie Dictionary further defines 'dwell' as:

1. to abide as a permanent resident.

As explained previously, you and the Deceased did not live together at the time of the Deceased's death. You and the Deceased separated over five years ago which is when the Deceased went to work overseas. The Deceased passed away overseas during the 2010-11 income year

Therefore, it is considered that the requirement specified in paragraph 302-200(1)(b) has been not been satisfied in this instance.

Application of subsection 302-200(2):

Essentially, this subsection ensures that where two people have a close personal relationship, however, because of the physical, intellectual or psychiatric disability of one of both of them, they do not satisfy one or more of the requirements in paragraphs 302-200(1)(b) to (d) of the ITAA 1997, they will still be considered to have an interdependent relationship.

In this case subsection 302-200(2) of the ITAA 1997 does not apply as neither you nor the Deceased suffered from a physical, intellectual or psychiatric disability.

Other requirements

As stated above, all of the requirements in section 302-200 of the ITAA 1997 must be satisfied in order for two people to be in an interdependency relationship. In this case, because the requirement in paragraph 302-200(1)(a), or alternately the requirement in subsection 302-200(2), has not been met, it is not necessary to consider the other requirements.

Conclusion

From the facts presented, it is clear that all of the requirements which are set out in section 302-200 of the ITAA 1997 have not been satisfied in this case. Consequently it is considered that the deceased and you were not in an interdependency relationship.

However, you are a former spouse of the Deceased in accordance with the definition of a death benefits dependant under section 302-195 of the ITAA 1997.

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