Edited version of private advice

Authorisation Number: 1051925939372

Date of advice: 3 December 2021

Ruling

Subject: Superannuation death benefits - interdependency relationship

Question

Is the Beneficiary in an interdependency relationship with the Deceased in accordance with section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following period:

Period ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The Beneficiary is one of three adult children of the Deceased.

The Deceased lived at his own home.

The Beneficiary live with her husband and children.

In 20XX, the Partner moved in with the Deceased at his home in a de facto relationship.

In 20XX, the Beneficiary and her siblings were nominated by the Deceased as legal guardians of his health and well-being in a health directive. The Deceased entrusted the Beneficiary to assist with his medical appointments and other health-related matters and to deal with his finances and home affairs.

In 20XX, the Beneficiary took the Deceased to a rehabilitation and aged care physician for an assessment of his capacity. The Beneficiary arranged and attended subsequent visits to the doctor with the Deceased.

In 20XX, the Beneficiary discussed with the Deceased and her siblings the option of converting the studio in her residence into an apartment in order that the Deceased may stay close to her and her immediate family. This was the Deceased's wish but hesitant to impose on the Beneficiary and her immediate family.

In February 20XX, the Deceased and his Partner ended their relationship and the Partner moved out of the Deceased's home.

The Beneficiary did not live together with the Deceased on a permanent or indefinite basis from 20XX until his death.

After the separation, the Deceased lived with the Beneficiary at her home for a few weeks.

In 20XX, the Deceased returned to his own home where the Beneficiary arranged for her child to stay with the Deceased one night per week to assist him with his medication, food, company, and other personal tasks in lieu of carer.

In 20XX, the Beneficiary arranged for a carer to provide in-home services to the Deceased to complement the assistance being provided by the Beneficiary and her siblings.

The Beneficiary took on a more active role in her caring responsibilities for the Deceased as he lived alone and suffered a rapid decline in his health.

The Beneficiary did not charge for professional services rendered for the Deceased and often paid for his daily living expenses out of her own money even though the his personal financial position was strong.

The Beneficiary was self-employed but managed to live on one income by drawing down on savings in the form of a term deposit that the Deceased gifted to her years earlier.

In 20XX, the Beneficiary, the Deceased and her siblings briefly discussed the option of purchasing her neighbour's house next door. However, the Deceased's symptoms progressed quickly for the Beneficiary to consider this option, which would have taken planning and designs etc, and she did not have the time available.

In 20XX, the Beneficiary helped the Deceased move from his main residence into a newly renovated apartment with lifts to better meet his needs.

The Beneficiary provided care and commitment towards the Deceased's emotional support and well-being including personal and domestic care and coordinated appointments with teams of external health professionals on an almost daily basis.

The Deceased had complex health issues and affairs, difficult needs to be met, increasing in severity and demand as time went on, which the Beneficiary attended to almost continuously in a variety of ways.

The Beneficiary personally managed all communication, liaison and contact with the in-home care agency. She had grave concerns over the Deceased's safety and was in contact with the carer on a regular basis to ensure he was receiving the best possible care.

The Deceased's condition became severe in the final two years of his life.

In 20XX, the Deceased spent several weeks with the Beneficiary during a holiday.

In 20XX, the Beneficiary stayed with the Deceased at his holiday home during the Christmas holiday.

In 20XX, the Deceased nominated the Beneficiary to be his sole legal representative and case guardian a court proceedings, which the Beneficiary attended to diligently and brought to a successful resolution.

In 20XX, the Deceased paid for the Beneficiary's children's school fees to assist her financially. The Deceased provided similar financial support for the Beneficiary's children's schooling in previous years.

In 20XX, the Doctor wrote a letter to the Deceased's lawyer confirming that he was incapable with respect to the management of his financial affairs and business interests and was incapable of representing himself in legal matters. The letter confirmed that the Deceased's condition had particularly accelerated in the last one to two years.

It became increasingly clear that the Deceased was unable to be alone for any period at his home. Due to his worsening condition, he began to require on-on-one company and supervision.

The Beneficiary searched for the most appropriate and acceptable environment for the Deceased to live in.

In 20XX, the Beneficiary helped the Deceased move to an aged care facility for initial respite care.

In 20XX, the Deceased had an episode and was admitted to hospital.

In 20XX, the Beneficiary moved the Deceased to another facility for further long-term assessment.

In 20XX, the Beneficiary moved the Deceased to another aged care facility.

The Beneficiary continued to engage the in-home care private services for several days per week for social support so that the Deceased could maintain on-on-one care with the familiar workers he had built a relationship with.

The Beneficiary spent much of her time visiting the Deceased and coordinating his care and ensuring there was always someone by his side day and night, so he was never left alone.

In 20XX, the Deceased suffered a serious accident at the aged care facility.

The Deceased was admitted to hospital and was discharged back to the aged care facility a few days later.

The Deceased died in 20XX.

The Deceased's children are the trustees and executors of the deceased estate.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 302-195

Income Tax Assessment Act 1997 section 302-200

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

Reasons for Decision

Summary

An interdependency relationship did not exist between the Deceased and the Beneficiary because the requirements under section 302-200 of the ITAA 1997 had not been met.

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 of the deceased.

A superannuation death benefit is defined in section 307-5 of the ITAA 1997 as:

A payment to you from a superannuation fund, after another person's death, because the other person was a fund member.

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. Subsection 302-195(1) of the ITAA 1997 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 the adult child of the Deceased, paragraphs 302-195(1)(a) and (b) are not applicable.

The definition of death benefits dependant does not stipulate the nature or degree of dependency required to be a dependant of the deceased person in paragraph 302-195(d) of the ITAA 1997. However, it is generally accepted that this paragraph refers to financial dependence.

The Beneficiary was not financially dependent on the Deceased and therefore, paragraph 302-195(d) is not applicable.

To meet the definition of a death benefits dependant, the Beneficiary must have been in an interdependency relationship with the Deceased, in accordance with paragraph 302-195(1)(c) of the ITAA 1997.

Interdependency relationship

Under subsection 302-200(1) of the ITAA 1997, an interdependency relationship is defined as:

Two persons (whether or not related by family) have an interdependency relationship under this section 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(2) of the ITAA 1997 states:

In addition, 2 persons (whether or not related by family) also have an interdependency relationship under this section if:

a)       they have a close personal relationship; and

b)       they do not satisfy one or more of the requirements of an interdependency relationship mentioned in paragraphs (1)(b), (c) and (d); and

c)       the reason they do not satisfy those requirements is that either or both of them suffer from a physical, intellectual or psychiatric disability.

To assist in determining whether two people have an interdependency relationship, paragraph 302-200(3)(a) of the ITAA 1997 provides that the regulations may specify the matters that are or are not to be taken into account.

Subregulation 302-200.01(2) of the Income Tax Assessment Regulations 2021 (ITAR 2021) states the matters to be taken into account as follows:

all of the circumstances of the relationship between the persons, including (where relevant)

•         the duration of the relationship

•         whether or not a sexual relationship exists

•         the ownership, use and acquisition of property

•         the degree of mutual commitment to a shared life

•         the care and support of children

•         the reputation and public aspects of the relationship

•         the degree of emotional support

•         the extent to which the relationship is one of mere convenience

•         any evidence 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 with the other person.

Subregulation 302-200.02(2) of the ITAR 2021 provides that an interdependency relationship exists between two people where:

a)       they satisfy the requirements of paragraphs 302-200(1)(a) to (c) of the ITAA 1997; and

b)       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 by a mere friend or flatmate, for example one person provides significant care for the other person when they are unwell or suffering emotionally.

Subregulations 302-200.02(3) and (4) of the ITAR 2021 provide that an interdependency relationship also exists between two people where:

•         they have a close personal relationship; and

•         they do not satisfy the other requirements set out in subsection 302-200(1) of the ITAA 1997 because:

­   they are temporarily living apart, for example because one of them is temporarily working overseas or in gaol; or

­   one (or both) of them suffers from a disability.

Subregulation 302-200.02(5) of the ITAR 2021 states that two persons do not have an interdependency relationship if one of them provides domestic support and personal care to the other:

a)         under an employment contract or a contract for services; or

b)         on behalf of another person or organisation such as a government agency, a body corporate or a benevolent or charitable organisation.

All of the conditions in subsection 302-200(1) of the ITAA 1997, or alternatively, subsection 302-200(2) of the ITAA 1997, or one of the tests in regulation 302-200.02 of the ITAR 2021 must be satisfied for a person to be in an interdependency relationship with another person. We deal with each condition in turn, to establish if an interdependency relationship existed.

Close personal relationship

The first requirement to be met is specified in paragraph 302-200(1)(a) of the ITAA 1997, which states that the two persons (whether or not related by family) must have a close personal relationship.

This requirement is common to all of the tests specified in section 302-200 of the ITAA 1997 and regulation 302-200.02 of the ITAR 2021.

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, which states:

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.

Indicators of a close personal relationship may include:

•         the duration of the relationship

•         the degree of mutual commitment to a shared life

•         the reputation and public aspects of the relationship (such as whether the relationship is publicly acknowledged).

The above indicators are not an exclusive list and none of them are required for a close personal relationship to exist.

People who share accommodation for convenience (such as flatmates) or people who provide care as part of an employment relationship or on behalf of a charity are not intended to fall within the definition of a close personal relationship.

The Explanatory Statement to the Income Tax Amendment Regulations 2005 (No.7) stated that:

Generally speaking, it is not expected that children will be in an interdependency relationship with their parents.

While this statement does not preclude a child from being in an interdependency relationship with a parent, it suggests that interdependency only exists where the relationship goes beyond the usual relationship between an adult child and a parent.

A close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not normally exist between a parent and an adult child because there would not be a mutual commitment to a shared life between the two. In addition, the relationship between parents and their adult children would be expected to change significantly over time. It would be expected that the adult child would eventually move out and secure independence from their parents.

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).

The Deceased and the Beneficiary did not live together except on three occasions lasting several weeks each as follows:

•         The Deceased stayed at the Beneficiary's home for several weeks after the Deceased's separation from his partner.

•         The Beneficiary stayed at the Deceased's home for several weeks during the 20XX Christmas holidays.

•         The Beneficiary and the Deceased holidayed together for several weeks.

The Deceased and the Beneficiary did not live together on a permanent basis and the Deceased was not a part of the Beneficiary's homelife. The Deceased and the Beneficiary failed to demonstrate that there was 'a mutual commitment to a shared life' between them.

The Beneficiary arranged for a carer from an in-home services agency to provide domestic support and personal care to the Deceased at his home to complement the assistance being provided by the Beneficiary and her siblings. This does not demonstrate an 'ongoing commitment to the emotional support and well-being of the two parties'.

The living arrangements and the interactions that existed between the Beneficiary and the Deceased showed that there were no unusual and 'exceptional circumstances' that existed which would demonstrate that 'the relationship goes beyond the usual relationship between an adult child and a parent'.

The Beneficiary and the Deceased did not have a close personal relationship that 'goes beyond the usual relationship between an adult child and a parent' and therefore, does not satisfy paragraph 302-200(1)(a) of the ITAA 1997 .

Living together

The second requirement to be met is specified in paragraph 302-200(1)(b) of the ITAA 1997 and states that two interdependent persons (whether or not related by family) live together.

Alternatively, paragraph 302-200(2)(c) of the ITAA 1997 provides that 2 persons (whether or not related by family) have an interdependent relationship if they have a close personal relationship, but does not satisfy one or more of the requirements mentioned in paragraphs 1(b), (c), and (d) under section 302-200 of the ITAA 1997, and the reason they do not satisfy those requirements is because either or both of them suffer from a physical, intellectual or psychiatric disability.

The term 'live' 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. In the context of paragraph 302-200(1)(b), the living arrangements must have some degree of permanency that is only disturbed by the death of one of the persons.

The facts contain the following assertions:

•         The Beneficiary discussed with the Deceased and her siblings the option of converting the studio in her residence into an apartment so that the Deceased could live there.

•         The Beneficiary, the Deceased and her siblings briefly discussed the option of purchasing the Beneficiarry's neighbour's house next door so that the Deceased could move and live there.

•         The Deceased lived in his own home and eventually had been moved to several aged care facilities until his death.

•         The Beneficiary did not live together with the Deceased on a permanent or indefinite basis until his death.

The facts do not refer to 'any evidence suggesting that the parties intend the relationship to be permanent'.

The Deceased and the Beneciary did not live together and therefore, does not satisfy paragraph 302-200(1)(b) of the ITAA 1997.

The Deceased and the Beneficiary did not live together. The Deceased lived in his own home and was moved to several aged care facilities when his health condition deteriorated, until his death.

The Deceased and the Beneficiary did not have a permanent living arrangement and the Deceased was not a part of the Beneficiary's family life.They failed to demonstrate a 'strong mutual commitment to a shared life'.

If the Deceased and the Beneficiary did not live together and did not have 'a strong mutual commitment to a shared life' before the Deceased was moved to several aged care facilities due to his detreriorating health condition, it could not be argued that the reason they could not satisfy paragraph 302-200(1)(b) of the ITAA 1997 is because either or both of them suffer from a physical, intellectual or psychiatric disability.

The Deceased and the Beneciary did not live together prior to the Deceased being moved to several aged care facilities due to his deteriorating health condition until his death and therefore, does not satisfy paragraph 302-200(2)(c) of the ITAA 1997.

Financial support

The third requirement to be met is specified in paragraph 302-200(1)(c) of the ITAA 1997, which states that one or each of these two persons provides the other with financial support.

Financial support under paragraph 302-200(1)(c) of the ITAA 1997 is satisfied if some level of financial support (not necessarily substantial) is being provided by one person (or each of them) to the other.

Both the Deceased and the Beneficiary are financially independent. The facts however, contain an assertion that the Deceased and the Beneficiary provided each other with some level of financial support and thereby satisfies paragraph 302-200(1)(c) of the ITAA97.

Domestic support and personal care

The fourth requirement to be met is specified in paragraph 302-200(1)(d) of the ITAA 1997, which states that one or each of these two persons provides the other with 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.

The Beneficiary arranged for a carer from an in-home services agency to provide domestic support and personal care to the Deceased at his home to complement the assistance being provided by the Beneficiary and her siblings.

The Beneciary did not provide significant domestic support and personal care to the Deceased and therefore, does not satisfy paragraph paragraph 302-200(1)(d) of the ITAA 1997.

Conclusion

After consideration of the facts, it is therefore concluded that the requirements in accordance with section 302-200 of the ITAA 1997 had not been met and therefore, the Beneficiary is not in an interdependency relationship with the Deceased.

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