Edited version of your written advice

Authorisation Number: 1051205786731

Date of advice: 29 March 2017

Ruling

Subject: Superannuation death benefits payments

Question

Is a person (the Beneficiary) a death benefits dependant 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 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 2016

The scheme commences on:

1 July 2015

Relevant facts and circumstances

The Deceased died 2015.

The Beneficiary is a parent of the Deceased.

The Deceased never married and had no children.

At the time of their death, the Deceased was living with the Beneficiary and the Beneficiary's spouse (a parent of the Deceased).

The Deceased suffered with serious illnesses. The ongoing effects of these illnesses restricted the Deceased's ability to perform everyday tasks and they required ongoing care and support.

The Deceased's main source of income was a Government payment as the nature of their illness made it difficult for them to maintain ongoing employment.

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

● contributing to household expenses including providing the Deceased with clothes and work tools when necessary and assisting the Deceased to manage their own finances;

● providing money to one another to cover household expenses when necessary;

● cleaning, laundry and providing meals;

● accompanying the Deceased to and from medical appointments; and

● providing emotional support to the Deceased.

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

● sharing finances with the Beneficiary including sharing a bank account and contributing to household expenses; and

● undertaking the heavier domestic tasks the Beneficiary was unable to do

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 death benefits 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 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 stated 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 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 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 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

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 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 matters 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. On the few occasions the Deceased did leave home for work, they were unable to cope and had to return home;

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

● the Beneficiary provided the Deceased with emotional support and care during their illness; and

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

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 through the sharing of finances for household expenses.

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 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 presented, the Beneficiary provided domestic support and personal care to the Deceased on an ongoing basis. This consisted of undertaking household tasks such as cleaning, laundry and providing meals and providing emotional support to the Deceased during their illness such as, transporting the Deceased as they were unable to cope away from home.

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 relationship of 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 'dependant' of the Deceased under paragraph 302-195(1)(d) of the ITAA 1997.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).