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Edited version of your written advice

Authorisation Number: 1051185592493

Date of advice: 30 January 2017

Ruling

Subject: Taxation of superannuation death benefits

Question

Is the Beneficiary a death benefits dependant of 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 with the Deceased under section 302-200 of the ITAA 1997 just before they died?

Answer

Yes

This ruling applies for the following period:

Income year ended 30 June 20YY

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The Beneficiary is a child of the Deceased aged more than 18 years.

The Deceased suffered from two diseases. The ongoing and progressive effects of these illnesses restricted the Deceased's ability to perform everyday physical tasks and, as their health declined, they required ongoing care and support.

The Beneficiary suffered from multiple medical conditions. The ongoing effects of these illnesses meant that the Beneficiary required ongoing emotional support.

The Beneficiary cared for the Deceased following the death of the Deceased's spouse, until the Deceased's death.

The Deceased lived with the Beneficiary, with brief periods of respite care, until their complex care needs required them to move into an aged-care facility.

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

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

After the Deceased moved into an aged-care facility, the Beneficiary continued to care for the Deceased by:

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 section 302-200 of the ITAA 1997 existed between the Deceased and the Beneficiary just before the Deceased died. Therefore, the Beneficiary is a death benefits dependant of the Deceased as defined in section 302-195 of the ITAA 1997.

Detailed reasoning

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

*To find definitions of asterisked terms, see the Dictionary, starting at 995-1.

As the Beneficiary is a child of the Deceased aged over 18, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 do not apply. Therefore, to conclude that the Beneficiary is a death benefits dependant of the Deceased, it must be established that the Beneficiary had an 'interdependency relationship' with the Deceased or that they were a 'dependant' 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:

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 Regulation 1997 (ITAR 1997) states that in considering paragraph 302-200(3)(a) of the ITAA 1997, matters to be taken into account are all relevant circumstances of the relationship between the persons, including (in this case):

Close personal relationship

Generally, a close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not exist between a parent and child. This is because the relationship between a parent and child would be expected to change significantly over time and there would be no mutual commitment to a shared life between the two. However, where, as in this case, unusual and exceptional circumstances exist, a relationship between a parent and child may be treated as an interdependency relationship for the purposes of subsection 302-200(1) of the ITAA 1997.

In 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 matters that indicate that the Beneficiary and the Deceased had a close personal relationship are:

Living together

At the time of their death, the Deceased lived in an aged-care facility.

Accordingly, paragraph 302-200(1)(b) of the ITAA 1997 is not satisfied as the Deceased and the Beneficiary were not living together at the time of the Deceased's death.

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 Beneficiary provided the Deceased with additional financial support necessary to meet their day-to-day living expenses, including food and accommodation.

In return, the Deceased also contributed towards the household expenses while living with the Beneficiary.

Therefore, it is considered that the Beneficiary and the Deceased provided financial support to each other as required under paragraph 302-200(1)(c) of the ITAA 1997.

Domestic support and personal care

Domestic support and personal care will be of a frequent and ongoing nature. For example, domestic support services will consist of attention 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.

In this case, the Beneficiary provided domestic support and personal care to the Deceased on an ongoing basis. This consisted of the Beneficiary undertaking household shopping, completing routine domestic tasks for the Deceased and providing the Deceased with personal care including showering, personal grooming and dressing. The Beneficiary continued to provide this support and care to the Deceased after the Deceased moved into an aged-care facility by making frequent visits to ensure that the Deceased was being cared for and to provide emotional support and companionship.

Based on the above, the requirements of paragraphs 302-200(1)(a), (c) and (d) of the ITAA 1997 are satisfied, but the requirements of paragraph 302-200(1)(b) of the ITAA 1997 are not satisfied because the parties did not live together just before the Deceased died.

However, in accordance with subsection 302-200(2) of the ITAA 1997, two persons also have an interdependency relationship if:

The Deceased suffered from the debilitating effects of two illnesses. It was because of the complex needs of the Deceased's illnesses that they could not live with the Beneficiary and had to move into an aged-care facility. That is, the requirements of paragraph 302-200(1)(b) of the ITAA 1997 (living together) are not satisfied, in this case, because the Deceased suffered from a physical and mental disability.

Therefore, although the Deceased and the Beneficiary did not live together just before the Deceased died as required by subsection 302-200(1) of the ITAA 1997, the Beneficiary had an interdependency relationship with the Deceased under subsection 302-200(2) of the ITAA 1997.

Consequently, the Beneficiary is a death benefits dependant of the Deceased for the purposes of section 302-195 of the ITAA 1997.


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