Edited version of private advice

Authorisation Number: 1051759494255

Date of advice: 6 April 2021

Ruling

Subject: Death benefits and interdependency relationship

Question

Is the Deceased's father a death benefits dependant of the Deceased in accordance with section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

Is the Deceased's mother a death benefits dependant of the Deceased in accordance with section 302-195 of the ITAA 1997?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

On DD MM YYYY, the Deceased passed away.

The Deceased always lived at home with the parents.

In 20XX, the Deceased temporarily moved interstate. After several weeks of training as part of a new job, the Deceased was injured and unable to continue the training.

During the time the Deceased was away, the parents helped support the Deceased by paying for the rent and giving the Deceased money for other expenses such as food.

The Deceased suffered from health issues and had to receive treatment on several occasions.

The Deceased's parents travelled many times interstate to support the Deceased both emotionally and financially.

The Deceased's health quickly deteriorated and on medical advice, the parents took the Deceased back home with them, where they cared for the Deceased, monitored the Deceased's health.

The Deceased was able to secure a job however, the parents still provided the Deceased with all the daily living requirements and covered the expenses as well.

Relevant legislative provisions

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 Section 302-300

Income Tax Assessment Regulations 1997 Regulation 302-200.01

Supplementary Explanatory Memorandum Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004

All references are to the ITAA 1997 unless otherwise indicated.

Reasons for decision

Detailed reasoning

Superannuation lump sum death benefits

Under section 302-60 a superannuation lump sum death benefit received by a person who is a 'death benefits dependant' of the deceased, is not assessable income and is not exempt income.

Meaning of death benefits dependant

Subsection 302-195(1) 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.

Paragraphs 302-195(1)(a) and (b) do not apply to the deceased's parents in this case. Therefore, in order to conclude that the deceased's parents are death benefits dependants of the Deceased, it must be established that they had an 'interdependency relationship', or that they were a 'dependant' of the Deceased just before the Deceased died.

Interdependency relationship

Subsection 302-200(1) 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) provides that matters to be taken into account in determining whether two persons have an interdependency relationship under that section may be specified in the regulations. Regulation 302-200.01 of the Income Tax Assessment Regulations 1997 (ITAR 1997) states that in considering paragraph 302-200(3)(a), the matters to be taken into account, are all the relevant circumstances of the relationship between the persons, including:

•         the duration of the relationship; and

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

•         the reputation and public aspects of the relationship; and

•         the degree of emotional support; and

•         the care and support of children; 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; and

•         the existence of a statutory declaration signed by one of the persons to the effect that the person is, or (in the case of a statutory declaration made after the end of the relationship) was, in an interdependency relationship.

Close personal relationship

A close personal relationship, as specified in subsection 302-200(1), 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).

Based on the facts of this case, it is considered that the relationship between the Deceased and her parents 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).

Living together

The Deceased and the parents were living together prior to the Deceased's death. Therefore, paragraph 302-200(1)(b) has been satisfied.

Financial support

In Re Malek v. Federal Commissioner of Taxation Case [1999] AATA 678; (1999) 42 ATR 1203, (1999) 99 ATC 2294, Senior Member Pascoe of the Administrative Appeals Tribunal (AAT) expressed his view on financial support:

10. In my view, the question is not to be decided by counting up the dollars required to be spent on the necessities of life for [Mrs Malek], then calculating the proportion of those dollars provided by the [son] and regarding her as a dependant only if that proportion exceeds 50%...In my view, the relevant financial support is that required to maintain the person's normal standard of living and the question of fact to be answered is whether the alleged dependant was reliant on the regular continuous contribution of the other person to maintain that standard.

In this case, the facts indicate that the Deceased's parents provided financial support to the Deceased.

Accordingly, paragraph 302-200(1)(c) has been satisfied.

Domestic support and personal care

The meaning of domestic support and personal care was discussed in the Supplementary

Explanatory Memorandum Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004 and paragraph 2.16 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.

Based on the facts of this case, the Deceased's parents provided domestic support and personal care to the Deceased on an ongoing basis.

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

Conclusion

The Deceased and the parents had an interdependency relationship within the meaning of subsection 302-200(1).

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