Edited version of your private ruling

Authorisation Number: 1012609367784

Ruling

Subject: Death benefit - interdependency

Question

Was the deceased and the deceased's sibling in an interdependency relationship?

Answer

Yes.

This ruling applies for the following periods:

The year ending 30 June 2014.

The scheme commences on:

1 July 2013.

Relevant facts and circumstances

You act for the Trustee of a self-managed Superannuation Fund.

The Deceased passed away during the relevant income year due to a serious illness. The Deceased was over 65 years of age at the time of death.

The Deceased was a member and trustee a self-managed Superannuation Fund (the Fund). The Deceased's sibling is also a member and trustee of the Fund.

The Deceased bequeathed all of their assets to the sibling upon death.

The Deceased and the sibling are both divorcees and initially lived together for a number of years for company and friendship in the Deceased's sibling's residence. However, for several years prior to the Deceased's date of death, the sibling cared for the Deceased as various illnesses had taken over the Deceased's life.

The Deceased suffered from multiple diseases and illnesses, which required the Deceased to attend hospital on a regular basis for acute medical issues and ongoing medical care.

You advised that whilst the Deceased was financially able to meet their costs of living, the Deceased became reliant upon the sibling for:

• Living arrangements - cooking, feeding, washing clothes and bathing.

• Transport arrangements - shopping for food and medical appointments.

• Managing finances - liaising with lawyers, accountant and financial advisor including paying for the Deceased's living costs.

• Managing the Deceased's medications and doctors' appointments.

The Deceased's sibling received a Centrelink carer's benefit.

There were no other carers looking after the Deceased, or any other people living with the Deceased and the sibling.

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 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(2)(a).

Income Tax Assessment Act 1997 Paragraph 302-200(2)(b).

Income Tax Assessment Act 1997 Paragraph 302-200(2)(c).

Income Tax Regulations 1997 Regulation 302-200.01(2).

Reasons for decision

Summary

It is accepted that the Deceased and the sibling were in an interdependency relationship. Therefore the Deceased's sibling is a death benefit's dependant of the Deceased.

Detailed reasoning

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 who receives the superannuation death benefit is a dependant of the deceased or not 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.

Section 302-195 of the ITAA 1997 defines death benefits dependant as follows:

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

(a) the deceased persons spouse or former spouse; or

(b) the deceased persons 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.

As the Deceased's sibling cannot qualify under paragraphs (a), (b) or (d) of the above definition, paragraph (c) of section 302-195 of the ITAA 1997 needs to be examined.

Interdependency relationship

Paragraph (c) of the definition of 'death benefits dependant' in section 300-195 of the ITAA 1997 refers to the term 'interdependency relationship'.

Under section 302-200(1) of the ITAA 1997 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.

Section 302-200(2) of the ITAA 1997 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.

All of the conditions in subsection 302-200(1) of the ITAA 1997, or alternatively both the condition in paragraph 302-200(1)(a) and the condition in subsection 302-200(2), must be satisfied for a person to be in an interdependency relationship with another person.

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

In addition, paragraph 302-200(3)(b) of the ITAA 1997 states that the regulations may specify the circumstances in which two persons have, or do not have an interdependency relationship under subsections 302-200(1) and (2).

For the purposes of paragraph 302-200(3)(a) of the ITAA 1997 subregulation 302-200.01(2) of the Income Tax Assessment Regulations 1997 (ITAR 1997) sets out the matters to be taken into account in determining whether two persons have an interdependency relationship. These matters include:

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, …

It is proposed to deal with each condition of subsection 302-200(1) of the ITAA 1997 in turn.

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 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 inserted former section 27AAB of the ITAA 1936. In discussing the meaning of close personal relationship the SEM states:

2.12 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.

2.13 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).

2.14 The above indicators do not form an exclusive list, nor are any of them a requirement for a close personal relationship to exist.

2.15 It is not intended that people who share accommodation for convenience (e.g. flatmates), or people who provide care as part of an employment relationship or on behalf of a charity should fall within the definition of close personal relationship.

A close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not normally exist between siblings because there would not be a mutual commitment to a shared life between the two. In addition, the relationship between siblings would be expected to change significantly over time.

The facts show that the Deceased and the beneficiary were siblings, to whom the Deceased bequeathed all of their assets upon their death. Clearly a familial relationship existed between the Deceased and the sibling prior to, and at the time of, the Deceased's death. Given that the Deceased was at an advanced age at the time of death, the Deceased and the sibling had of course known each other for some time.

In this case the Deceased suffered from multiple diseases and illnesses. As a result, the Deceased required constant care. The sibling would arrange to take the Deceased to their medical appointments, ensured the Deceased took their prescriptions and also assisted with the Deceased's living arrangements (preparing meals and bathing for example).

In addition, the Deceased's sibling was receiving carer's benefits from Centrelink for the care they provided to the Deceased.

The facts of this case show that the relationship between the Deceased and the sibling was over and above that of a normal family relationship for adult siblings living together. There is evidence of a mutual commitment to a shared life between the Deceased and the sibling prior to and at the time of the Deceased's death.

Therefore, it is accepted that a close personal relationship existed between the Deceased and the sibling as envisaged by paragraph 302-200(1)(a) of the ITAA 1997.

Cohabitation:

The second requirement to be met is specified in paragraph 302-200(1)(b) of the ITAA 1997 and states the two persons live together.

The facts show that the Deceased lived with their sibling at the sibling's residence for several years until the Deceased's death.

Therefore the requirement under paragraph 302-200(1)(b) of the ITAA 1997 has been met.

Financial support:

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 these two persons 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.

It is clear from the facts presented that the Deceased's sibling provided the Deceased with financial support. You advised that whilst the Deceased was financially able to meet their costs of living, the sibling would still pay for the Deceased's living costs. Further, the duties and tasks undertaken by the sibling, for example, such as cooking, shopping, providing transport etc would represent added expenses which were incurred in the household from the time of the Deceased having taken up residence with their sibling.

In this instance, both the existence and the level of financial assistance provided in the relationship between the Deceased and the sibling is established and it is not necessary to look at the level of financial support provided, but merely to establish that such support existed.

Consequently, it is considered that paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied in this instance.

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. 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 term 'personal care' is also discussed in the New South Wales Supreme Court in Dridi v. Fillmore [2001] NSWSC 319. Master Macready stated, in regards to the term 'domestic support and personal care', that:

The expression [personal care] seems to be directed to a different level of reality such as assistance with mobility, personal hygiene and physical comfort. Such activities obviously however will include an element of emotional support.

From the facts provided the Deceased's sibling provided domestic support to the Deceased including cooking, washing clothes, attending to household shopping and ensuring medication was correctly taken. The Deceased's sibling also provided personal care in the form of bathing and feeding the Deceased.

Due to the Deceased's health issues, the domestic support and personal care services that the sibling provided are above that expected in an ordinary sibling relationship.

On the facts provided, it is considered that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied in this instance.

Conclusion

As all conditions have been satisfied, it is accepted that the Deceased and their sibling had an interdependency relationship. Therefore, in the period prior to and at the time of the Deceased's death, the Deceased's sibling is considered to be a dependant of the Deceased for the purposes of subsection 302-200(1) of the ITAA 1997.

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