Edited version of your written advice

Authorisation Number: 1012972057919

Date of advice: 1 March 2016

Ruling

Subject: Death benefit - interdependency

Question

Is a person (the Taxpayer) a death benefits dependant of a person who has died (the Deceased) for the purposes of Division 302 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 

Yes

This ruling applies for the following period:

Income year ending 30 June 2016

The scheme commences on:

1 July 2015

Relevant facts and circumstances

The Deceased died during the 20XX-XX income year.

The Deceased was over 18 years of age.

The Taxpayer was a relative of the Deceased.

The Taxpayer and the Deceased's family were close.

The Deceased was diagnosed with a medical condition many years ago.

The Taxpayer moved into the Deceased's house to care for the Deceased when the Deceased was diagnosed with the medical condition.

The Deceased and the taxpayer shared the same residence for many years.

The Taxpayer attended to most of the domestic and banking duties.

Information provided also shows the Taxpayer aided the Deceased with mobility and hygiene matters.

In the later stages of the medical condition the Deceased's mobility was reduced considerably.

No one else was living with the Deceased while the Taxpayer was caring for the Deceased. The Taxpayer was able to manage the Deceased until the condition took a firmer hold.

The Taxpayer and the Deceased shared the residence for many years until the Deceased was admitted to hospital for assessment.

Medical reports and other documentation have been provided which state:

(a) the Taxpayer was the Deceased's carer;

(b) the Taxpayer, who was aged, was stressed with their own medical issues;

(c) the Deceased would not be able to manage at home without the support of a full time carer and as the Taxpayer was now unable to care for the Deceased's high care needs the only option to ensure the Deceased's safety was placement in a care facility; and

(d) it was not possible for external care agencies to provide the care the Deceased needed at home.

After being discharged from hospital the Deceased was transferred to a nursing home (the Nursing Home).

From the time the Deceased was transferred to the Nursing Home the Taxpayer visited the Deceased several times a week and purchased the Deceased anything that was required.

Each time the Taxpayer visited the Deceased in the Nursing Home it entailed a lengthy round trip. Once in the Nursing Home, the Deceased's health deteriorated to a point where the Deceased could not return home.

Details have been provided which show:

(a) the financial support received by the Taxpayer from the Deceased;

(b) the financial support the Taxpayer provided the Deceased; and

(c) the domestic and care provided by the Taxpayer for Deceased.

Relevant legislative provisions

Income Tax Assessment Act 1997 Division 302

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 Assessment Regulations 1997 Regulation 302-200.01

Income Tax Assessment Regulations 1997 regulation 302-200.02

Reasons for decision

Summary

The Taxpayer and the Deceased had an interdependency relationship under section 302-200 of the ITAA 1997 just before the Deceased died. Therefore, the Taxpayer is a death benefits dependant of the Deceased for the purposes of Division 302 of the ITAA 1997.

Detailed reasoning

The 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 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.

The Taxpayer is a relative of the Deceased therefore paragraphs 302-195(1)(a) and (b) of the ITAA 1997 do not apply in this case.

Also, based on the facts of the case, the Taxpayer was not a dependant of the Deceased under paragraph 302-195(1)(d) of the ITAA 1997. Therefore, paragraph 302-195(1)(c) of the ITAA 1997 must be considered to determine whether the Deceased and the Taxpayer had an interdependency relationship under 302-200 of the ITAA 1997 just before the Deceased died.

Interdependency relationship

Under subsection 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.

In accordance with subsection 302-200(2) of the ITAA 1997, two persons may also have an interdependency relationship if they have a close personal relationship but cannot satisfy any of the other requirements of subsection 302-200(1) of the ITAA 1997 because either or both of them suffer from a physical, intellectual or psychiatric disability.

Subsection 302-200(3) of the ITAA 1997 provides that matters and circumstances that are, or are not, to be taken into account in determining whether two persons have an interdependency relationship under that section may be specified in the regulations.

To that effect, subregulation 302-200.01 of the Income Tax Assessment Regulations 1997 (ITAR 1997) provides that the matters to be taken into account for the purposes of paragraph 302-200(3)(a) of the ITAA 1997 (where relevant) are all the circumstances of the relationship between the persons, including (in this case):

(i)  the duration of the relationship; and …

(iii) the ownership, use and acquisition of property; and

(iv)  the degree of mutual commitment to a shared life; 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 …

Explanatory Statement to the Income Tax Amendment Regulations 2005 (No 7) which introduced regulations that specified matters that are, or are not, to be taken into account in determining whether two people have an interdependency relationship for the purposes of former section 27AAB of the Income Tax Assessment Act 1936 - the immediate predecessor of section 302-200 of the ITAA 1997 - states:

It is not necessary for each of the listed circumstances to be satisfied in order for an interdependency relationship to exist. There are circumstances in which it would be inappropriate to consider certain matters. For example, it would not be relevant to consider whether there was a sexual relationship when determining whether an interdependency relationship existed between siblings.

Each of the matters listed is to be given the appropriate weighting under the circumstances. The degree to which any matter is met or is present or not, as the case may be, does not necessarily of its own accord, confirm or preclude the existence of an interdependency relationship.

Close personal relationship:

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:

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.

In this case, a close familial relationship existed between the Taxpayer and the Deceased at the time of the Deceased's death.

The Taxpayer was the Deceased's relative and had lived with the Deceased for many years from the time the Deceased was diagnosed with a medical condition (the condition) until the Deceased was admitted to hospital some years later and subsequently to a nursing home (the Nursing Home).

During the time they resided together the Taxpayer provided care for the Deceased and most of the domestic duties. The Taxpayer also attended to the Deceased's hygiene, helped the Deceased to be mobile, took and accompanied the Deceased to medical appointments.

Accordingly, the facts show that were it not for the Deceased being placed in a Nursing Home, because of the Deceased's deteriorating medical condition and the Taxpayer's no longer be physically able to care for the Deceased due to advanced age, the Taxpayer would have continued to provide the same support to the Deceased.

After the Deceased moved out of the residence which was shared with the Taxpayer a strong familial bond with the Deceased continued as evidence by the Taxpayer's regular visits to the Deceased at the Nursing Home.

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

Living together:

The Deceased and the Taxpayer were not living at the same address at the time of the Deceased's death. Therefore, the requirement specified in paragraph 302-200(1)(b) of the ITAA 1997 has not been satisfied in this instance.

Financial support:

Financial support under paragraph 302-200(1)(c) of the ITAA 1997 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, it is considered that paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied as the facts show there was financial support between the Taxpayer and the Deceased from the time that they resided together up to the time of the Deceased's death.

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.

From the facts, the Taxpayer lived in a nursing home for a period of time until the date of death. As a result, there was no need for the Taxpayer to provide the Deceased with domestic support and personal care. Therefore, it is considered that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has not been satisfied in this instance.

Therefore, applying subsection 302-200(1) of the ITAA 1997 to the Taxpayer's circumstances, the Taxpayer meets the requirements of paragraphs 302-200(1)(a) and (c) but fails paragraphs (b) and (d) of that subsection. That being the case, subsection 302-200(2) of the ITAA 1997 requires consideration to determine whether the Taxpayer and the Deceased were in an interdependency relationship nonetheless.

Application of subsection 302-200(2) of the ITAA 1997:

In accordance with paragraph 302-200(2)(c) of the ITAA 1997, two parties may still have an interdependency relationship if the reason that paragraphs 302-200(1)(b), (c) or (d) of the ITAA 1997 were not met is due to a 'physical, intellectual or psychiatric disability' suffered by one or both parties.

As mentioned above, it is considered that the Taxpayer and the Deceased had a close personal relationship but paragraphs 302-200(1)(b) and (d) of the ITAA 1997 have not been satisfied in this case. Therefore, to conclude that the Taxpayer and the Deceased were in an interdependency relationship just before the Deceased died, it must be established that the reason the Taxpayer did not live with the Deceased; and that the reason neither provided the other with domestic and personal care was because the Taxpayer had a medical condition, that is, the Taxpayer suffered from a disability.

On the basis of the nature of the Taxpayer's disability and the Deceased's advanced age, it is considered that the Deceased and the Taxpayer could not live together because of the Taxpayer's disability.

Further, because the Deceased, by reason of the disability resided in a fully supported facility, there was no need for the Taxpayer to provide the Deceased with domestic and personal support at the time of the Deceased's death.

As the requirements set out in subsection 302-200(2) of the ITAA 1997 have been satisfied in this case, it is considered that the Deceased and the Taxpayer had an interdependency relationship just before the Deceased died.

Consequently, the Taxpayer is a death benefits dependant of the Deceased within the definition of section 302-195 of the ITAA 1997.

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