Edited version of your written advice

Authorisation Number: 1013114816620

Date of advice: 27 October 2016

Ruling

Subject: Superannuation death benefits- interdependency relationships

Question

Is a person (the Beneficiary) a death benefits dependent of a person who has died (the Deceased) in accordance with section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997) by virtue of being in an interdependency relationship pursuant to section 302-200 of the ITAA 1997 with the Deceased?

Answer

Yes.

This ruling applies for the following periods:

Income year ended 30 June 20YY.

The scheme commences on:

1 July 20XX.

Relevant facts and circumstances

The Beneficiary is a parent of the Deceased

The Deceased never married and had no children.

At the time of their death, the Deceased lived in their family home with the Beneficiary and the Beneficiary's spouse (the other parent of the Deceased).

The Deceased suffered from a serious medical condition. The ongoing and progressive effects of their illness restricted the Deceased's ability to perform everyday physical tasks and, as their health declined, they required ongoing care and support.

The Beneficiary provided the Deceased with ongoing domestic support and personal care including the following:

● caring for the Deceased following major surgery by helping them into and out of bed and assisting them with dressing, toileting and showering;

● purchasing the Deceased's clothes;

● providing emotional support to the Deceased when dealing with difficult issues at work or when feeling sad and lonely; and

● undertaking the heavier household tasks that the Deceased was not able to perform due to the effects of their illness.

The Deceased provided the Beneficiary with ongoing financial and domestic support, including the following:

● attending to the Beneficiary's computer needs such as programming, maintaining and email account, updating software and any other computer requirements;

● paying for their share of the internet and phone bill and contributing to household expenses, including the groceries;

● prior to their medical emergency and subsequent surgery, the Deceased performed domestic tasks such as vacuuming and gardening; and

● following their medical emergency, the Deceased undertook light domestic duties.

The Beneficiary has signed a Statutory Declaration stating that they were in an interdependency relationship with the Deceased 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 Regulations 1997 Regulation 302-200.01.

Reasons for decision

Summary

An interdependency relationship as defined under subsection 302-200(1) of the ITAA 1997 existed between the Deceased and the Beneficiary just before the Deceased died. Therefore, the Beneficiary is a death benefits dependent of the Deceased as defined in section 302-195 of the ITAA 1997.

Detailed Reasoning

Meaning of death benefits dependent

Subsection 302-195(1) of the ITAA 1997 defines a death benefit dependent of a person who has died as:

(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 dependent of the deceased just before he or she died.

*To find the definition of asterisked terms, see the Dictionary, starting at section 995-1

As the Beneficiary is a parent of the Deceased, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 do not apply in this case. Therefore, to conclude that the Beneficiary is a death benefits dependent of the Deceased, it must be established that the Beneficiary had an 'interdependency relationship' with the Deceased, or that they were a 'dependent' of the Deceased just before the Deceased died.

What is an interdependency relationship?

Subsection 302-200(1) of the ITAA 1997 states that two persons (whether or not related by family) have an interdependency relationship 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(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, regulation 302-200.01 of the Income Tax Assessment Regulations 1997 (ITAR 1997) states that in considering subparagraph 302-200(3)(a) of the ITAA 1997, matters to be taken into account are all the relevant circumstances of the relationship between the persons, including (in this case):

(a) the duration of the relationship; and

(b) the degree of mutual commitment to a shared life; and

(c) the reputation and public aspects of the relationship; and

(d) the degree of emotional support; and

(e) the extent to which the relationship is one of mere convenience; and

(f) any evidence suggesting that the parties intend the relationship to be permanent; and

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

Close personal relationship

A close personal relationship, as specified in subsection 302-200(1) of the ITAA 1997, would not normally exist between parents and their children because there would not normally be a mutual commitment to a shared life between the two. In addition, an adult child's relationship with their parents would be expected to change significantly over time as the child moves out of home and obtained independence.

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.

Applying the above to this case, it is considered that the relationship between the Beneficiary and the Deceased was over and above that of a normal family relationship and that a close personal relationship existed as required by paragraph 302-200(1)(a) of the ITAA 1997.

The mattes that indicate that the Beneficiary and the Deceased had a close personal relationship prior to the Deceased's death are:

● the Deceased had lived with the Beneficiary all of their life; they never moved out of the family home, never married and had no children;

● the Beneficiary provided the Deceased with emotional support during their illness and at other difficult times;

● the facts indicate that the relationship between the Deceased and the Beneficiary was likely to be permanent;

● there is nothing to indicate that the relationship was one of mere convenience; and

● the Beneficiary has provided a Statutory Declaration to the effect that the Beneficiary and the Deceased were in an interdependency relationship as defined in section 302-200 of the ITAA 1997.

Living together

The Deceased and the Beneficiary were living together at the time of the Deceased's death and had done so for the duration of the Deceased's life.

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, the facts indicate that the Deceased provided financial support to the Beneficiary in the form of regular weekly contribution of money towards their expenses, including utilities and groceries.

Domestic support and personal care

Domestic support and personal care will commonly be of a frequent and ongoing nature. For example, domestic support services will consists 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 presented, the Beneficiary provided domestic support and personal care to the Deceased on an ongoing basis. This consisted of assisting the Deceased with basic necessities such as showering and toileting, undertaking heavy domestic tasks that the Deceased could no longer manage and providing emotional support during their illness and at other difficult times.

It is therefore considered that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied in this instance.

The Beneficiary meets all the requirements of an interdependency relationship for the purposes of subsection 300-200(1) of the ITAA 1997. Therefore the Beneficiary is a death benefits dependent of the Deceased for the purposes of section 302-195 of the ITAA 1997.

Consequently, it is not necessary to consider whether the Beneficiary is a 'dependent' of the Deceased under paragraph 302-195(1)(d) of the ITAA 1997.

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