Edited version of your written advice

Authorisation Number: 1051241207606

Date of advice: 23 June 2017

Ruling

Subject: Superannuation death benefits

Question

Did the Beneficiary have an interdependency relationship pursuant to section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997) with the Deceased at the time of the Deceased’s death?

Answer

Yes

This ruling applies for the following period:

Income year ending 30 June 201E

The scheme commences on:

1 July 201D

Relevant facts and circumstances

The Deceased passed away in the 201C-1D income year.

The Beneficiary is a child of the Deceased.

The Deceased suffered from a severe illness.

The Beneficiary left school early in the 201A-1B income year, in part to give the Deceased emotional support and care.

The Beneficiary had obtained part time work after leaving school and contributed to household costs with the money they earned.

You advised in the years preceding the Deceased’s death, the Beneficiary:

● worked a job part-time; and

● was on a Government allowance; and

● did not earn enough money to support themselves.

The Beneficiary provided the Deceased with ongoing domestic support, personal care and emotional support to help them cope with their worsening illness.

The Beneficiary suffers from an undiagnosed medical condition.

The Deceased provided the Beneficiary with ongoing financial and domestic support. The Beneficiary was reliant on the Deceased for accommodation, meals and clothing.

At the time of their death, the Deceased had been living in their home with the Beneficiary. The Beneficiary had resided with the Deceased for the duration of the Beneficiary’s life.

The Deceased was a member of Superfund A and Superfund B.

As a result of the Deceased’s death, the Beneficiary received a payment from Superfund A and Superfund B in the 201D-1E income year.

The Beneficiary was over 18 years of age when they received the payment.

You provide that after the Deceased’s death the Beneficiary became homeless and had to rely on friends for accommodation and sustenance.

Relevant legislative provisions

Income Tax Assessment Act 1997 Division 302

Income Tax Assessment Act 1997 Section 302-60

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 Regulations 1997 Regulation 302-200.02(2)

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 dependant of the Deceased as defined in section 302-195 of the ITAA 1997.

Detailed reasoning

Meaning of death benefits dependant

Division 302 of the ITAA 1997 sets out the taxation arrangements that apply to the payment of superannuation death benefits. These arrangements depend on whether the person that receives the superannuation death benefit is a dependant or non dependant of the deceased and whether the benefit is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit.

In accordance with section 302-60 of the ITAA 1997, where a person receives a superannuation lump sum death benefit and that person was a 'death benefits dependant’ of the deceased, it is not assessable income and is not exempt income.

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. Section 302-195 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 the definition of asterisked terms, see the Dictionary, starting at section 995-1.

As the Beneficiary is a child of the Deceased who was over 18 at the time of the Deceased’s death, 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?

Section 302-200 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 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.

In accordance with regulation 302-200.01(2) of the Income Tax Regulations 1997 (ITAR 1997), matters that are to be taken into account in determining whether two persons have an interdependency relationship include, where relevant, the following:

(i) the duration of the relationship; and

(ii) whether or not a sexual relationship exists; and

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

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

(v) the care and support of children; 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

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

Regulation 302-200.02(2) of the ITAR 1997 states that two persons have an interdependency relationship if:

(a) they satisfy the requirements of paragraphs 302-200(1)(a) to (c) of the Act; and

(b) 1 or each of them provides the other with support and care of a type and quality normally provided in a close personal relationship, rather than by a mere friend or flatmate.

Examples of care normally provided in a close personal relationship rather than by a friend or flatmate

1. Significant care provided for the other person when he or she is unwell.

2. Significant care provided for the other person when he or she is suffering emotionally

Close personal relationship

A detailed explanation of subsection 302-200(1) of the ITAA 1997 is set out in the Supplementary Explanatory Memorandum (SEM) to the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004. In discussing the meaning of 'close personal relationship’ the SEM, as far as relevant, 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.

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 Beneficiary and the Deceased provided each other with ongoing support. The support provided by the Beneficiary and the Deceased to each other was enduring in nature. The Beneficiary had left school early in part to give the Deceased emotional support and care. There was an ongoing commitment by the Beneficiary to ensure the well-being of the Deceased and provide the Deceased with emotional support.

Living together

The Deceased and the Beneficiary were living together at the time of the Deceased’s death and they had done so for the duration of the Beneficiary’s life. Therefore, the requirement specified in paragraph 302-200(1)(b) of the ITAA 1997 has 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, the facts indicate that the Deceased provided financial support to the Beneficiary in providing for the Beneficiary’s daily living costs. In addition, the Beneficiary had used their part time wages and government allowances to contribute to household costs.

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.

In this case, the Beneficiary provided the Deceased with ongoing domestic support, personal care and emotional support to help them cope with their worsening illness.

In addition the Deceased provided the Beneficiary with ongoing domestic support. The Beneficiary was also reliant on the Deceased for accommodation, meals and clothing.

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

As all conditions of subsection 302-200(1) of the ITAA 1997 have been satisfied, the Beneficiary and the Deceased had an interdependency relationship under section 302-200 of the ITAA 1997 just before the Deceased died.

Therefore, the Beneficiary is a death benefits dependant of the Deceased under paragraph 302-195(1)(c) of the ITAA 1997. As such, there is no need to consider whether the Beneficiary is a dependant of the Deceased under paragraph 302-195(1)(d) of the ITAA 1997.

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