Edited version of your written advice

Authorisation Number: 1051496314247

Date of advice: 21 March 2019

Ruling

Subject: Interdependency

Question

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

Year ended 30 June 2018

The scheme commences on:

1 July 2017

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.

The Deceased passed away in the 2017-18 income year aged over 18 years of age as a result of a serious medical condition

The Beneficiary is a parent of the Deceased.

The Beneficiary and the Deceased were living together from the time the Deceased’s underwent surgery for their medical condition to the time of their death. Prior to this date the Deceased lived with their then partner.

The Deceased worked away from home from early to mid-2017, but had no other place of abode and their personal belongings remained at the Beneficiary’s residence. As a result of their illness, the Deceased stopped working and returned to the residence of the Beneficiary before passing away.

The Beneficiary provided the Deceased with ongoing financial support in the following form:

● provision of their home as a residence; and

● contributing to living costs including rates and utilities, household times and maintenance, groceries, medication and access to a motor vehicle and running costs .

The Beneficiary provided the Deceased with ongoing domestic support and personal care in the following form:

● assisting the Deceased by preparing food, washing their clothes, maintaining household duties;

● transporting the Deceased to and from medical appointments including travelling from one town to another to attend medical appointments, including one visit where the Beneficiary remained in a town for a period of one to two months while the Deceased was in hospital;

● attending counselling sessions in order to provide better emotional support to the Deceased;

● assisting in the relief of pain and anxiety resulting from the Deceased medical condition; and

● as the Deceased’s health deteriorated in the last stages of their life , the Beneficiary provided a significant level of care and support to the Deceased.

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

● contributing from their disability support pension towards household expenses.

The Beneficiary has signed a Statutory Declaration stating that they were in an interdependency relationship with the Deceased.

The Trustee of the deceased estate (the Estate) has received a superannuation death benefit of from two complying funds.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 302-10

Income Tax Assessment Act 1997 Subsection 302-195 (1)

Income Tax Assessment Act 1997 Paragraph 302-195 (1) (c)

Income Tax Assessment Act 1997 Subsection 302-200 (1)

Income Tax Assessment Act 1997 Paragraph 302-200 (1) (a)

Income Tax Assessment Act 1997 Paragraph 302-200 (1) (b)

Income Tax Assessment Act 1997 Paragraph 302-200 (1) (c)

Income Tax Assessment Act 1997 Paragraph 302-200 (1) (d)

Income Tax Assessment Act 1997 Subsection 302-200 (2)

Income Tax Assessment Act 1997 Paragraph 302-200 (3) (a)

Income Tax Assessment Regulations 1997 Subregulation 302-200.01(2)

Reasons for decision

Summary

An interdependency relationship as defined under subsection 302-200 (1) existed between the Deceased and the Beneficiary just before the Deceased died.

Therefore, in relation to the death benefit paid to the estate of the Deceased, the Beneficiary is considered a death benefits dependant of the Deceased as defined in subsection 302-195 (1).

Detailed reasoning

Superannuation death benefits paid to the trustee of a deceased estate

A payment made by a superannuation fund to a deceased estate after the death of the deceased is assessed as a death benefit under section 302-10.

The taxation arrangements that apply to this superannuation death benefit are determined in accordance with the taxation arrangements that would otherwise apply to the person or persons otherwise intended to benefit from the estate.

For example, where a dependant of the deceased receives part, or all of, a superannuation death benefit and has benefited, or is expected to benefit, the trustee will not be subject to tax on that part of the benefit paid to the dependant as if it were paid to a dependant of the deceased.

Death benefits dependant

Subsection 302-195(1) defines a death benefits dependant as follows:

A death benefits dependant, of a person who has died, is:

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 person just before he or she died.

As the Beneficiary is a parent of the Deceased, 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.

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 provides that the regulations may specify:

(a) matters that are, or are not, to be taken into account in determining under subsection (1) or (2) whether 2 persons have an interdependency relationship; and

(b) circumstances in which 2 persons have, or do not have, an interdependency relationship

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):

● the duration of the relationship; and

● the ownership use and acquisition of property; and

● the degree of mutual commitment to a shared life; and

● the degree of emotional support; and

● the extent to which the relationship is one of mere convenience; and

● any evidence suggesting that the parties intend the relationship to be permanent.

Close personal relationship

A close personal relationship is generally one that involves a demonstrated and ongoing commitment to the emotional support and well-being of the two parties. Indicators of a close personal relationship may include the duration of the relationship and the degree of mutual commitment to a shared life.

In accordance with regulation 302-200.02 of the ITAR 1997, two persons have an interdependency relationship if they satisfy the requirements of paragraphs 302-200 (1) (a) to (c) of the ITAA 1997 and one 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 a mere friend or flatmate. For example, significant care provided to another person when they are unwell or when they are suffering emotionally.

Generally, ‘a close personal relationship’ as specified in subsection 302-200(1) of the ITAA 1997 would not exist between a parent and a child. This is because the relationship between a parent and a 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 Deceased and the Beneficiary was over and above that of a normal family relationship, and beyond what might be expected of a friend or flatmate. A close personal relationship existed as required by paragraph 302-200(1)(a) of the ITAA 1997.

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

● the Beneficiary provided full time care for the Deceased during their illness until their death;

● significant personal, and emotional support was provided by the Beneficiary to the Deceased during the time the Deceased suffered from a serious illness until the Deceased’s death;

● the Deceased provided some financial support to the Beneficiary to assist with the household costs;

● the Deceased and the Beneficiary lived together and shared all household expenses; and

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

Living together

The phrase ‘live together’ is not defined in the ITAA 1997 or accompanying regulations. According to the Macquarie Dictionary, the term ‘live’ means to dwell or reside. The term ‘reside’ is defined as the action of dwelling in a particular place permanently or for a considerable time.

Therefore, as paragraph 302-200(1)(b) of the ITAA 1997 requires that the persons live together, it is considered in the context of the provision, that the living arrangements must have some degree of permanency.

In determining if the persons live together it is relevant to have regard to ‘the degree of mutual commitment to a shared life’ and ‘any evidence suggesting that the parties intend the relationship to be permanent’. In this instance, the Deceased moved into the Beneficiary’s main residence following their heart transplant operation. Even when the Deceased was away they did not have an alternate residence and retained their belongings at the Beneficiary’s residence. The Deceased resided at the Beneficiary’s residence until their death.

It is considered that the Beneficiary and the Deceased had committed to a shared life together and intended the relationship to be permanent.

Therefore, it is considered that the Beneficiary and the Deceased lived together

Financial support

Financial support under paragraph 302-200(1)(c) is satisfied if some level (not necessarily substantial) of financial support is being provided by one person (or each of them) to the other, for example providing support for a person’s household and/or medical expenses.

In this case, the facts indicate that the Beneficiary and the Deceased provided financial support to one another by sharing rent, utility and household expenses. The Beneficiary provided a residence and covered the household expenses. The Deceased contributed by way of disability pensions and employment income.

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 activities. Personal care service may consist of assistance with mobility, personal hygiene and generally ensuring the physical and emotional comfort of a person.

The facts presented indicate that the Beneficiary and the Deceased provided one another with domestic support and personal care on an ongoing basis. The Beneficiary assisted the Deceased with the basic necessities following the Deceased’s diagnosis such as preparing meals, laundry, and transportation to medical appointments, as well as providing significant emotional support to the Deceased.

Conclusion

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

Based on the above, the Beneficiary meets all the requirements of an 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

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