Edited version of private advice

Authorisation Number: 1051327031059

Date of advice: 10 August 2018

Ruling

Subject: Death benefits dependant

Question

Is the beneficiary a death benefits dependant of the 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 with the Deceased.

Answer

Yes

This ruling applies for the following period:

Income year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

1.              The Deceased died in 20XX.

2.              The Beneficiary is the Deceased's sibling.

3.              The Deceased never married and had no spouse or children.

4.              In 20XX, the Beneficiary moved overseas on a temporary basis. The Beneficiary decided to remain in a foreign country in 20XX after receiving an offer for permanent employment.

5.              The Deceased was diagnosed with a terminal illness in 20XX.

6.              The Beneficiary returned to Australia to visit the Deceased in 20XX. While visiting the Deceased, the Beneficiary took an indefinite leave of absence from his job because the ongoing and progressive effect of the Deceased's illness restricted his ability to perform everyday physical tasks and, as his health declined, he required ongoing care and support.

7.              The Deceased was discharged from hospital and moved into a shared accommodation with the Beneficiary. During this time, the Beneficiary provided the Deceased with ongoing domestic support and personal care, including the following:

·         Caring for the Deceased by administering medications and helping him with eating, drinking and personal grooming;

·         Assisting the Deceased with routine domestic tasks such as shopping, laundry and cleaning.

·         Providing the Deceased with companionship and emotional support.

8.              The Deceased provided the Beneficiary with ongoing financial support including the following:

·         Paying for groceries and household bills

9.              Based on prior medical advice, the Beneficiary expected to be living with and caring for the deceased for at least one year.

10.           The Deceased's superannuation fund paid a lump sum death benefit (the Benefit) to the Trustee of the Deceased Estate (the Trustee) on 12 April 2016. This was subsequently distributed to the Beneficiary by the Trustee.

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

11.           An interdependency relationship pursuant to section 302-200 of the ITAA 1997 existed between the Deceased and the Beneficiary just before the Deceased died. The Beneficiary is, therefore, a death benefits dependant of the Deceased in accordance with section 302-195 of the ITAA 1997.

Detailed reasoning

12.           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 section 995-1.

13.           The Beneficiary is the Deceased's child and is over the age of 18, so paragraphs (a) and (b) of subsection 302-195(1) of the ITAA 1997 do not apply. Therefore, in order 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?

14.           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.

15.           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.

16.           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.

17.           The facts provided indicate that the Beneficiary and the Deceased had a close personal relationship in that:

·         The Beneficiary took an indefinite leave of absence from his job so that he could live with, and take care of, the Beneficiary. During this period the Beneficiary provided the Deceased with significant care;

·         Following the Deceased's diagnosis, the beneficiary made several return trips to Australia in 20XX;

·         While the Deceased was in hospital, the Beneficiary undertook routine physical tasks on behalf of the deceased as well as liaising with doctors and;

·         There is nothing to indicate that the relationship was one of mere convenience.

Close personal relationship

18.           Generally, a close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not exist between siblings. This is because the relationship between siblings 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.

19.           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.

20.           The matters that indicate that the Beneficiary and the Deceased had a close personal relationship are:

·         the Beneficiary left his job and moved to another country to care for the Deceased;

·         the Beneficiary was prepared to provide care to the Deceased for the rest of his life

·         while the parties lived together, they provided each other with ongoing financial, domestic and emotional support;

·         the parties' behaviour indicates a mutual intention that their close familial relationship was permanent;

·         the Beneficiary's ongoing commitment to provide extensive emotional and domestic support and personal care to the Deceased indicates that their relationship was not one of mere convenience.

Living together

21.           Paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied as the Beneficiary was living with the Deceased at the time of their death.

Financial support

22.           Financial support under paragraph 302-200(1)(c) of the ITAA 1997 is satisfied if some level of financial support is being provided by one person to the other.

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

24.           The Beneficiary also contributed towards the household expenses while living with the Deceased.

25.           Therefore, 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

26.           Domestic support and personal care must be of a frequent and ongoing nature. For example, domestic support services may consist of attention to household shopping, cleaning and laundry services. Personal care services may commonly consist of assistance with mobility, personal hygiene and generally ensuring the physical and emotional comfort of a person.

27.           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. This level of domestic support and personal care continued until just before the Deceased died.

28.           Based on the above, the requirements of paragraphs 302-200(1)(a), (b) and (c) of the ITAA 1997 are satisfied. Therefore, the Beneficiary is a death benefits dependant of the Deceased for the purpose of section 302-195 of the ITAA 1997 by virtue of being in an interdependency relationship with the Deceased just before they died.

29.           Consequently, it is not necessary to consider whether the Beneficiary was a dependant of the Deceased just before the Deceased died.

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