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Edited version of your private ruling

Authorisation Number: 1012560569046

Ruling

Subject: Interdependency relationships

Question

Did an interdependency relationship exist between the taxpayer and the deceased within the meaning of section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

This ruling applies for the following period:

Income year ending 30 June 2014

The scheme commences on:

During the income year 30 June 2014

Relevant facts and circumstances

1. The Taxpayer is the parent of the Deceased who died in 20XX.

2. After leaving home, the Deceased had returned to live with their parents several times during periods of unemployment and in between rental contracts before moving in permanently in mid 20YY.

3. While the Deceased lived in their parents' home, the parents provided the Deceased with financial assistance and the Deceased was not required to make any financial contribution to the household running cost. The Taxpayer did the majority of domestic duties, while the Deceased cooked once a week and helped out with the heavier work around the house and the garden.

4. For several years prior to their death, the Deceased had suffered from a major psychological illness and alcohol addiction; was prone to self-harm and was considered to be at risk of suicide. During this time, the Taxpayer was responsible for many aspects of the Deceased's daily care including meals; monitoring use of medication; trying to monitor and limit their drinking and behaviour and getting them to doctor's appointments.

5. In late 200X, the Taxpayer's spouse (Deceased's parent) died. This was a very difficult time for both the Taxpayer and the Deceased. The Deceased depression escalated and shortly after the Deceased returned to live with the Taxpayer on a permanent basis.

6. While the Deceased lived with the Taxpayer, the Taxpayer supported the Deceased both financially and emotionally as the Deceased was unemployed during this time. The Deceased did not contribute towards household running costs and the Taxpayer provided them with domestic support including cooking and cleaning.

7. Shortly after Taxpayer's spouse died, the Taxpayer provided the Deceased with a car which was fully maintained for the Deceased, including paying for petrol, registration, insurance and servicing costs. The Taxpayer also paid for the Deceased's mobile phone bills, food and other necessities.

8. In early 20XX, the Deceased lost their driver's licence and from that time on, the Deceased relied on the Taxpayer for transport. At this time, the Deceased was under the medical supervision of staff at a hospital and the Taxpayer took the Deceased to numerous medical appointments at the hospital.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 302-60

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

Income Tax Assessment Act 1997 Section 302-200

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

Reasons for decision

1. A superannuation lump sum a person receives because of the death of another person of whom the person is a death benefit dependant is not assessable income and is not exempt income.

2. The term 'death benefit dependant' is defined in subsection 302-195(1) of the ITAA 1997 and, as far as relevant, includes any person with whom the deceased person had an interdependency relationship under section 302-200 of the ITAA 1997 just before he or she died.

3. In accordance with subsection 302-200(1) of the ITAA 1997, two persons (whether or not related by family) have an interdependency relationship under section 302-200 of the ITAA 1997 if:

4. The definition of 'dependant' in relation to the receipt and taxation of superannuation death benefits was amended by the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004. The Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004 Supplementary Explanatory Memorandum (SEM) states:

5. In this case, a close familial relationship existed between the Taxpayer and the Deceased at the time of the Deceased's death. This was demonstrated in a number of ways such as the emotional support that the Taxpayer and the Deceased provided to each other after the death of a family member and the emotional support the Taxpayer provided to the Deceased during the time he/she suffered from depression and alcohol addiction.

6. Until his/her death, the Deceased and the Taxpayer had lived together (on and off) for a number of years. The Taxpayer provided the Deceased with financial support necessary for a normal standard of living.

7. In discussing the meaning of 'domestic support and personal care', the SEM states:

8. In view of the household activities performed by the Taxpayer the domestic support requirement has clearly been met.

9. Assistance provided by the Taxpayer to the Deceased in times of illness demonstrates an ongoing concern for the Deceased's emotional and physical wellbeing and comfort. When the emotional support provided by the Taxpayer is taken into account, the personal care requirement is considered to have been met.

10. Based on the above, it is considered that an interdependency relationship existed between the Taxpayer and the Deceased just before the Deceased's death.

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