Edited version of private advice

Authorisation Number: 1052115159123

Date of advice: 12 May 2023

Ruling

Subject: Superannuation death benefit - interdependency

Question

Is the Beneficiary a death benefits dependant of 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?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commence on:

1 July 20XX

Relevant facts and circumstances

The Deceased passed away in the 20XX-XX income year.

The Beneficiary is the adult child of the Deceased.

The Beneficiary was older than 18 years when the Deceased died.

You state that since 20XX the Deceased did not have a spouse.

The Deceased was diagnosed with cancer in the 20XX-XX income year.

The Beneficiary took leave from their final year of study to care for the Deceased and was the primary carer of the Deceased.

Prior to the Beneficiary starting work in the 20XX-XX income year, the Deceased provided financial support to the Beneficiary and paid for groceries, utilities and other bills such as land tax and council rates.

The Deceased had limited cashflow from their business and was financially dependent on the Beneficiary after the Beneficiary started working in the 20XX-XX income year.

The Beneficiary provided financial support to the Deceased in the late stages of the Deceased's illness. The Beneficiary bore most of the financial expenses for the household, including the utilities, the council rates and the proportion of the hospital admission fees and medication that were not covered by the Deceased's health insurance, till the date of the Deceased's death.

The Beneficiary provided domestic support to the Deceased including gardening, cleaning gutters, cleaning around the house, doing laundry, vacuuming, washing the car, shopping and preparation of meals. When the Deceased's medical condition worsened the Beneficiary's domestic support extended to assisting movement in the house, eating, dressing, showering and toileting.

The Beneficiary provided personal care and assistance to the Deceased, including:

•         support for the Deceased as they became physically frail and cognitively exhausted,

•         medical appointment management, involving taking the Deceased to and from such appointments and supporting the Deceased in making decisions about medical treatments, and

•         medication management, including collecting new prescription from the pharmacist.

The Beneficiary provided emotional support to the Deceased, including but not limited to supporting the Deceased in making decisions about treatment, accompanying the Deceased with post-operative rehabilitation walks, and providing positive conversations when the Deceased faced stressful and difficult situations caused by the illness.

When the Deceased was not an in-hospital patient, the Beneficiary lived with the Deceased in their family home. The Beneficiary had considered moving out of the family home but due to the impacts of the Covid-19 pandemic on the rental market and the Deceased's illness, the Beneficiary stayed living in the family home.

You state that since 20XX, no other persons lived in the family home other than the Deceased and the Beneficiary.

The Beneficiary has provided the following supporting documentation to support their private ruling for interdependency relationship existed between the Beneficiary and the Deceased:

•         Signed private ruling request form.

•         Statutory declaration for private ruling request.

•         Death certificate.

•         Copy of letters of administration & will.

•         Certificate Identifying exhibit to Statutory Declaration.

•         Application document outlining answers with supporting evidence to questions.

Relevant legislative provisions

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 (1997 Act) Regulations 2021 section 302-200.01

Income Tax Assessment (1997 Act) Regulations 2021 section 302-200.02

Reasons for decision

Summary:

An interdependency relationship existed between the Deceased and the Beneficiary. Therefore, the Beneficiary is a death benefits dependant of the Deceased.

Detailed reasoning

Meaning of death benefits dependant

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) 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

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(3) of the ITAA 1997 provides that 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 (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.

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 1997.

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 inserted former section 27AAB of the Income Tax Assessment Act 1936 (ITAA 1936). In discussing the meaning of close personal relationship the SEM 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.

2.13 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).

2.14 The above indicators do not form an exclusive list, nor are any of them a requirement for a close personal relationship to exist.

2.15 It is not intended that people who share accommodation for convenience (e.g. flatmates), or people who provide care as part of an employment relationship or on behalf of a charity should fall within the definition of close personal relationship.

In the Explanatory Statement to the Income Tax Amendment Regulations 2005 (No. 7) which inserted Regulation 8A into the ITR 1936, it stated that:

'It is not necessary for each of the listed circumstances to be satisfied in order for an interdependency relationship to exist. There are circumstances in which it would be inappropriate to consider certain matters. For example, it would not be relevant to consider whether there was a sexual relationship when determining whether an interdependency relationship existed between siblings.

Each of the matters listed is to be given the appropriate weighting under the circumstances. The degree to which any matter is met or is present or not, as the case may be, does not necessarily of its own accord, confirm or preclude the existence of an interdependency relationship

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

As stated above, the intention of the law is that a close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 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. It would be expected that the adult child would eventually move out and secure independence from their parents.

The relationship between the Beneficiary and the Deceased was over and above a normal family relationship between a parent and an adult child.

The Beneficiary provided significant care and support to the Deceased throughout their illness. The Beneficiary provided the Deceased with intensive and ongoing emotional and domestic support. This level of care exceeded the care and comfort that would usually be provided by an adult child to a parent. The matters that indicate the Beneficiary and the Deceased had a close personal relationship before the Deceased's death

Therefore, a close personal relationship existed between the Beneficiary and the Deceased as envisaged by paragraph 302-200(1)(a) of the ITAA 1997.

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 Beneficiary and the Deceased lived together in the family home. Consequently, the requirement specified in paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied in this case.

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 was provided by one person (or each of them) to the other, for example providing support for a person's household and/or medical expenses.

From the facts presented, the Beneficiary provided the Deceased with financial support during the final years of the Deceased's life. The Beneficiary bore most of the financial expenses for the household, including the utilities, the council rates and the proportion of the hospital admission fees and medication that were not covered by the Deceased's health insurance, till the date of the Deceased's death.

Consequently, paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied.

Domestic support and personal care

Domestic support and person 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 provided domestic support to the Deceased including gardening, cleaning gutters, cleaning around the house, doing laundry, vacuuming, washing car, shopping and preparation of meals. When the Deceased's medical condition worsened the Beneficiary's domestic support extended to assisting movement in the house, eating, dressing, showering and toileting.

The Beneficiary provided personal care and assistance to the Deceased, including:

•         support for the Deceased as they became physically frail and cognitively exhausted,

•         medical appointment management, involving taking the Deceased to and from such appointments and supporting the Deceased in making decisions about medical treatments, and

•         medication management, including collecting new prescription from the pharmacist.

The Beneficiary provided emotional support to the Deceased, including but not limited to supporting the Deceased in making decisions about treatment, accompanying the Deceased with post-operative rehabilitation walks, and providing positive conversations when the Deceased faced stressful and difficult situations caused by the illness.

Therefore, the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied.

Conclusion

As all of the requirements in section 302-200 of the ITAA 1997 have been satisfied, the Deceased and Beneficiary were in an interdependency relationship in the period just before the Deceased's death.

As the Beneficiary was in an interdependency relationship with the Deceased, the Beneficiary is a death benefits dependant as defined under section 302-195 of the ITAA 1997.

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