Edited version of private advice

Authorisation Number: 1052367254920

Date of advice: 23 May 2025

Ruling

Subject: Superannuation death benefit - interdependency

Question:

Is the Beneficiary a death benefits dependant of the Deceased according to section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997), due to being in an interdependency relationship with the Deceased under section 302-200 of the ITAA 1997?

Answer:

No.

This ruling applies for the following period

Year ending 30 June 2024

The scheme commences on:

1 July 2023

Relevant facts and circumstances:

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

1.    The Beneficiary is the adult child of the Deceased.

2.    The Deceased died XX XX 20XX (Date of Death).

3.    The Beneficiary was born on XX XX 19XX and was therefore older than 18 years when the Deceased died.

4.    The Beneficiary received a death benefit payment from the Deceased's superannuation fund (the Fund), in the amount of $XXX,XXX.XX There is no evidence of any tax being withheld from the payment.

5.    On XX XX 20XX, the Beneficiary applied for a private ruling on whether they were a death benefits dependant of the Deceased, due to having been financially dependant on the Deceased, prior to their death.

6.    In that application, the following documentation was provided:

•         Certified copy of the Beneficiary's drivers' licence, expiry date XX XX 20XX

•         Residential Tenancy Agreement for a property, made on XX XX 20XX. The agreement was signed by both the Beneficiary and the Deceased, as the tenants. The agreement was for the period XX XX 20XX to XX XX 20XX

•         Residential Rental Agreement for a property, made on XX XX 20XX, listing the Beneficiary as the 'Primary Tenant' and the Deceased as the 'Secondary Tenant'. The agreement was for the period XX XX 20XX to XX XX 20XX

•         Death certificate of the Deceased

•         'Application for XXXX Pension', signed by the Deceased on XX XX 20XX, listing the Beneficiary as the nominated beneficiary

•         A superannuation Exit Statement, for the Deceased's Pension. The statement lists the Beneficiary as the lone beneficiary for the account, based on a binding nomination

•         A letter dated XX XX 20XX, addressed to the Beneficiary. The letter confirms the payment of an amount from the Deceased's pension to the Beneficiary's bank account

•         'Dependency form' for the Estate of the Deceased, submitted to the Fund, signed by the Beneficiary on XX XX 20XX, listing the Beneficiary as 'Dependant 1'. A handwritten note on the form states 'This was the submission to the super fund & the basis on which the death benefit was paid out classified as a dependant'

•         A document entitled 'Super death benefits - who is a dependant for tax purposes?'

•         Various bank statements for the Beneficiary covering the period from XX XX 20XX and XX XX 20XX

•         Bank statements for the Deceased covering the period from XX XX 20XX and XX XX 20XX

7.    On XX XX 20XX, a ruling issued in response to the above application, advising that the Beneficiary was not a financial dependant of the Deceased.

8.    On XX XX 20XX, you applied for a private ruling on whether the Beneficiary is a death benefits dependant of the Deceased, due to being in an interdependency relationship. In support of that application, the following documentation was provided:

•         A copy of a Residential Tenancy Agreement, made on XX XX 20XX, signed by both the Beneficiary and the Deceased as tenants, for the period XX XX 20XX to XX XX 20XX, confirming the current address of both the Deceased and Beneficiary

•         A copy of a Learner Permit (Driver's Licence) for the Beneficiary, expiry date XX XX 20XX, showing the Beneficiary's address

9.    The following statements were made in support of that application, concerning the nature of the relationship between the Beneficiary and the Deceased:

•         The Beneficiary and the Deceased were not just parent and child but regarded each other as their best friend

•         They have always lived together in previous rental properties and have never lived separately until the date of the Deceased's passing

•         The Deceased could not afford to buy a home of their own and they instead chose to rent

•         The Deceased was a retiree who lived off their superannuation pension combined with an age pension and rent assistance

•         The Beneficiary has had health challenges and was on long term JobSeeker payments

•         The Beneficiary could not afford to live elsewhere on their limited income and relied on the Deceased's income to cover a considerable portion of the bills and rent to enable them to have a reasonable quality of life

•         The Beneficiary provided the Deceased with domestic support over many years and also acted as their carer throughout their illness

•         The Deceased and the Beneficiary had lived together for some time in rental properties prior to the Deceased becoming ill and passing, giving credence to the commitment they shared a life together out of a want (not just a need)

•         It was not just the circumstances in the Deceased's final days that brought them together, though it was particularly pertinent late in the piece with the financial and care aspects that were mutually beneficial

•         It was not just economic necessity.

•         The Deceased and the Beneficiary have always been close and gotten on well, and concluded sometime prior that they wanted to share a life together for as long as they could

10.  Subsequently, the following documentation was provided:

•         Health Care Card for the Beneficiary, effective from XX XX 20XX, to expiry date XX XX 20XX, showing the Beneficiary's address

•         An excerpt of an email from the Beneficiary dated XX XX 20XX, stating their address

•         Photo of the Deceased and the Beneficiary dated XX XX 20XX, purportedly attending a convention together

•         Letter from a university, dated XX XX 20XX, addressed to the Beneficiary

•         Bank statements for the Beneficiary, covering the period XX XX 20XX to XX XX 20XX, listing their address

•         Bank statements for the Beneficiary, covering the period XX XX 20XX to XX XX 20XX, listing their address

•         Bank statements for the Deceased, covering the period XX XX 20XX to XX XX 20XX. The Beneficiary indicated this was a 'home improvement account', that they both contributed to for maintenance of the property they resided at together

•         'myagedcare' Support Plan, including Assessment Summary, for the Deceased, dated XX XX 20XX Relevantly, the Assessment Summary advises:

-       the Beneficiary is the Deceased's main support and power of attorney

-       the Beneficiary has applied for carers payment but was not successful in receiving this

-       The Beneficiary linked to Carers Gateway and is seeking to apply for carers allowance as well

-       The Deceased walks unaided and reported no falls in recent months

-       The Deceased drives locally only otherwise is reliant on the Beneficiary to attend their regular treatment and specialist appointments

-       The Beneficiary manages the meals

-       The Beneficiary and the Deceased manage the shopping and the Deceased's medication together

-       The Deceased is managing their own laundry and personal care needs themself

•         The Support Plan outlines 'Areas of Concern' identified by the Deceased, focusing on how their illness affected their daily life.

•         Excerpts from emails dated XX XX 20XX, between the Benficiary and the real estate of the property the Beneficiary and the Deceased were then renting, seeking permission from the landlord to install railings on the front veranda steps and by the back bedroom door. The emails reference a physiotherapist view that these would be beneficial for the Deceased at that time.

•         A statutory declaration from the Beneficiary signed and dated XX XX 20XX that details their relationship with the Deceased

11.  ATO-held information shows that the Deceased lived at an address from 20XX until moving to another address during the 20XX-XX income year, where they resided until their passing.

12.  ATO-held information shows that the Beneficiary and the Deceased resided together (at more than one address) from at least 20XX until the Deceased's death.

Relevant legislative provisions:

Income Tax Assessment Act 1997 section 302-60

Income Tax Assessment Act 1997 section 302-145

Income Tax Assessment Act 1997 section 302-195

Income Tax Assessment Act 1997 section 302-200

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:

Meaning of death benefits dependant

1.    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 and whether the amount is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit.

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

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

3.    A superannuation lump sum is described in section 307-65 of the ITAA 1997 as a superannuation benefit that is not a superannuation income stream, as defined in section 307-70 of the ITAA 1997.

4.    The taxable component of a superannuation death benefit paid as a lump sum to a non-dependant beneficiary is assessable income and is taxed under section 302-145 of the ITAA 1997.

5.    Where a person who was a dependant of the deceased receives a superannuation death benefit paid as a lump sum, the death benefit is not assessable income and is not exempt income, under section 302-60 of the ITAA 1997.

6.    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.

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

8.    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(1)(d) of the ITAA 1997. However, it is generally accepted that this paragraph refers to financial dependence.

9.    The Beneficiary was not financially dependent on the Deceased and therefore, paragraph 302-195(1)(d) of the ITAA 1997 is not applicable.

10.  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

11.  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.

12.  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.

13.  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.

14.  Subsection 302-200.01(2) of the Income Tax Assessment (1997 Act) Regulations 2021 (ITAR 2021) states the matters to be taken into account. These matters are all of the circumstances of the relationship between the persons, including (where relevant):

a.    the duration of the relationship

b.    the ownership, use and acquisition of property

c.     the degree of mutual commitment to a shared life

d.    the care and support of children

e.    the reputation and public aspects of the relationship

f.      the degree of emotional support

g.    the extent to which the relationship is one of mere convenience

h.    any evidence that the parties intend the relationship to be permanent; and

i.      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.

15.  Paragraph 302-200(3)(b) of the ITAA 1997 states that the regulations may specify the circumstances in which two people have, or do not have an interdependency relationship.

16.  Section 302-200.02 of the ITAR 2021 sets out the circumstances in which two people have an interdependency relationship.

17.  Subsection 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 both 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.

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

a.    they have a close personal relationship; and

b.    they do not satisfy one or more of the other requirements set out in subsection 302-200(1) of the ITAA 1997 because:

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

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

19. Subsection 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.

20.   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 section 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

21.  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.

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

23.  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.    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.

b.    Indicators of a close personal relationship may include:

i)      the duration of the relationship;

ii)     the degree of mutual commitment to a shared life;

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

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

25.  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

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

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

27.  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.

28.  A close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not normally exist be 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.

29.  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) of the ITAA 1997.

30.  The Beneficiary stated that they and the Deceased would bond over their love of anime, sci-fi and computers and would frequently go to conventions or events.

31.  In support of the above statement, the Beneficiary provided:

•         Bank statements, referencing XX transactions between XX XX 20XX to XX XX20XX at various cinemas, stating that these were times that they attended movies with the Deceased

•         A photo dated XX XX 20XX that the Beneficiary stated is of themselves and the Deceased attending a convention together

32.  The evidence provided does not sufficiently substantiate that the relationship between the Beneficiary and the Deceased was over and above a normal family relationship between a parent and an adult child.

33.  The above-referenced transactions do not provide evidence that the Beneficiary and the Deceased attended the movies together, on each, or any, of those occasions. Even were that the case, attending a movie once every two months on average with another party, is not considered evidence of a close personal relationship.

34.  While the provided photo does identify the Beneficiary and the Deceased, it was taken more than a decade before the Deceased's passing, at a time when the Beneficiary was still relatively young.

35.  As stated above, the relationship between parents and their adult children would be expected to change significantly over time. The photo is not indicative of frequent attendance together at conventions or events over the intervening years.

36.  It has also been stated in the application that the Beneficiary 'could not afford to live elsewhere on their limited income'. This illustrates that, regardless of the relationship, there was a need, an economic necessity, for them to live with the Deceased. This need increased in later years, due to the Deceased's health issues.

37.  The available evidence does not show that the Beneficiary and the Deceased shared a close personal relationship (for the purposes of being a death benefits dependant for tax purposes), or that they had a mutual commitment to a shared life.

38.  Therefore, a close personal relationship did not exist between the Beneficiary and the Deceased, and the first requirement specified in paragraph 302-200(1)(a) of the ITAA 1997 has not been satisfied in this case.

Living together

39.  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.

40.  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) of the ITAA 1997, the living arrangements must have some degree of permanency that is only disturbed by the death of one of the persons.

41.  Documentary evidence and ATO-held data (referenced above under 'Relevant facts and circumstances' confirm that the Beneficiary and the Deceased lived together from 20XX until the Deceased's passing.

42.  Consequently, the requirement specified in paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied in this case.

Financial support

43.  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.

44.  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.

45.  The Beneficiary was in receipt of fortnightly payments from Services Australia. The Deceased was in receipt of an age pension and a superannuation pension.

46.  The Beneficiary's bank statements show no evidence of rent payments from XX XX 20XX and XX XX 20XX.

47.  From XX XX 20XX, the provided statements evidence the Beneficiary transferring rent payments to the Deceased, gradually increasing to an average of $XXX per month.

48.  The bank statements of the Deceased from XX XX 20XX to XX XX 20XX indicate that they paid the majority of the rent during that period.

49.  The Beneficiary's bank statements reflect payments for essential expenses including food, clothing and medical costs, as well as personal expenses, such as hydro and streaming services.

50.  Bank statements for the Deceased's savings account (which the Beneficiary has stated was used as a 'home improvement account') for the period XX XX 20XX to XX XX 20XX have been provided.

51.  This account shows transfers of the following amounts from the Beneficiary, all with the notation 'Home maintenance':

•         XX XX 20XX to XX XX 20XX: $XXX

•         XX XX 20XX to XX XX 20XX: $XXX

•         XX XX 20XX to XX XX 20XX: $XXX

52.  The statements indicate that, from XX 20XX to XX 20XX, the Beneficiary consistently contributed between $XX and $XXX per month to this account.

53.  While the amounts were not substantial, the Deceased transferred money to the Beneficiary each month.

54.  Therefore, the Beneficiary and the Deceased provided each other with financial support during the final years of the Deceased's life.

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

Domestic support and personal care

56.  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:

a.    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.

57.  From the information provided, the Beneficiary and the Deceased provided each other with assistance by sharing the domestic chores and providing each other with emotional support.

58.  Prior to the Deceased's illness, the Beneficiary stated that they managed the shopping, cooking, laundry, and vacuuming, while the Deceased managed the dishes, maintained the lawns and tidied.

59.  The Deceased stated that the Deceased was diagnosed with stage 3 cancer (though the timeframe was not stated), and that, by XX 20XX, they had assumed the role of full-time carer.

60.  While no specific evidence was provided about the cancer diagnosis, the myagedcare Assessment Summary dated XX XX 20XX refers to the Deceased being 'referred...for a general assessment and explore supports following cancer diagnosis...'.

61.  The myagedcare 'Assessment Summary' dated XX XX 20XX states:

•         the Deceased lived with the Beneficiary who was their main support and power of attorney

•         The Deceased drove locally otherwise was reliant on the Beneficiary to attend their regular treatment and specialist appointments

•         The Beneficiary managed meals

•         The Deceased and the Beneficiary managed the shopping and the Deceased's medication together

•         The Deceased manages their own laundry and personal care needs themself

62.  Additionally, the Support Plan references the Deceased having difficulty completing cleaning tasks and having difficulty getting in and out of the car.

63.  It is accepted that the Beneficiary and the Deceased both assisted with domestic tasks. Further, the condition of the Deceased at a certain time required assistance with personal care, which the Beneficiary provided.

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

Conclusion

65.  As all of the requirements in section 302-200 of the ITAA 1997 have not been satisfied, the Deceased and Beneficiary were not in an interdependency relationship in the period just before the Deceased's death.

66.  As the Beneficiary was not in an interdependency relationship with the Deceased, the Beneficiary is not a death benefits dependant as defined under section 302-195 of the ITAA 1997.

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