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Edited version of your written advice
Authorisation Number: 1051185592493
Date of advice: 30 January 2017
Subject: Taxation of superannuation death benefits
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?
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:
● contributing to living expenses such as household bills and groceries;
● acting as the Deceased's enduring power of attorney;
● managing the sale of the Deceased's residential property;
● caring for the Deceased by assisting them with showering, personal grooming, dressing, overseeing the dispensation of the Deceased's medications and providing the Deceased with meals;
● caring for the Deceased following major surgery;
● assisting the Deceased with routine domestic tasks such as shopping, laundry, ironing and vacuuming;
● booking medical appointments for the Deceased and accompanying the Deceased to and from medical appointments; and
● providing the Deceased with companionship and emotional support.
The Deceased provided the Beneficiary with ongoing financial support and personal care, including the following:
● contributing to living expenses such as household bills and groceries; and
● providing the Beneficiary with ongoing emotion support.
After the Deceased moved into an aged-care facility, the Beneficiary continued to care for the Deceased by:
● purchasing clothing and hygiene and personal products for the Deceased;
● helping the Deceased with personal grooming and hygiene;
● assisting the Deceased with routine domestic tasks such as laundry and ironing;
● liaising with the staff at the aged-care facility to ensure the Deceased was properly cared for;
● transporting and accompanying the Deceased to all medical appointments; and
● providing emotional support to the Deceased.
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
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.
Subsection 302-195(1) of the ITAA 1997 defines a death benefits dependant 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 dependant of the deceased just before he or she died.
*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:
(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 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):
(a) the duration of the relationship; and
(b) the degree of mutual commitment to a shared life; and
(c) the degree of emotional support; and
(d) the extent to which the relationship is one of mere convenience; and
(e) any evidence suggesting that the parties intend the relationship to be permanent.
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:
● the Beneficiary provided care to the Deceased a significant period of time;
● the Beneficiary and the Deceased lived together until the Beneficiary could no longer provide the care that the Deceased required;
● while the parties lived together, they provided each other with ongoing financial, domestic and emotional support;
● after the Deceased moved to an aged-care facility, the Beneficiary continued to provide financial, domestic and emotional support to the Deceased;
● the parties' behaviour indicates a mutual intention that their close familial relationship was permanent; the Deceased moved into the aged-care facility only because the Beneficiary was no longer physically able to care for them; and
● the Beneficiary's ongoing commitment to provide extensive emotional and domestic support and personal care to the Deceased despite living separately at times, indicates that their relationship was not one of mere convenience.
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 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:
(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, mental or psychiatric disability.
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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