Edited version of private advice

Authorisation Number: 1012644649774

Ruling

Subject: Interdependency relationship

Question

Were you and the Deceased in an interdependency relationship at the time of the Deceased's death?

Answer

Yes

This ruling applies for the following period

The year ending 30 June 2014.

The scheme commences on

1 July 2013.

Relevant facts and circumstances

The Deceased died during the relevant income year due to a medical condition. The Deceased was under 55 years of age.

The Deceased was a member and held superannuation accounts with Fund A and Fund B.

You are the sole beneficiary of the Deceased's estate.

You and the Deceased are companions and lived together for a specified number of years, continuously up until the Deceased's death. In 20XX, you and the Deceased moved to a specific property to be near medical facilities to assist the Deceased. You and the Deceased owned the property together as joint tenants.

The Deceased suffered from various disabilities and received a disability pension. The deceased had a history of health illnesses and was hospitalised many times.

You advised that for a number of years immediately before the Deceased's death, you provided the following:

_ Carer related domestic support - household duties, help organise the Deceased's life, near daily cleaning, sanitisation and laundry.

_ Ongoing personal care - personal hygiene oversight, medication compliance and blood sugar monitoring, nutrition and meals, calling for ambulance support and interfacing with the Deceased's GP.

You advised that you provided long-term emotional support to each other and relied on each other for companionship you also advised the Deceased was regarded as part of your family and the Deceased, part of yours.

As the Deceased's full time carer, you received a Centrelink carer payment and carer allowance.

You and the Deceased were partially dependent upon each other specifically for the costs of running the household and paying bills. Towards the end of the Deceased's life you became dependent upon the Deceased financially as you had terminated your employment to become the Deceased's full time carer.

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 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(2)(a).

Income Tax Assessment Act 1997 Paragraph 302-200(2)(b).

Income Tax Assessment Act 1997 Paragraph 302-200(2)(c).

Income Tax Regulations 1997 Regulation 302-200.01(2).

Reasons for decision

Summary

It is accepted that you and the Deceased were in an interdependency relationship. Therefore you are a death benefits dependant of the Deceased.

Detailed reasoning

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 who receives the superannuation death benefit is a dependant of the deceased or not and whether the amount is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit.

Under section 302-60 of the ITAA 1997, where a person receives a superannuation death benefit that is a lump sum and that person was a death benefits dependant, it is not assessable income and is not exempt income.

Section 302-195 of the ITAA 1997 defines death benefits dependant as follows:

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

(a) the deceased persons spouse or former spouse; or

(b) the deceased persons 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 you cannot qualify under paragraphs (a), (b) or (d) of the above definition, paragraph (c) of section 302-195 of the ITAA 1997 needs to be examined.

Interdependency relationship

Paragraph (c) of the definition of 'death benefits dependant' in section 300-195 of the ITAA 1997 refers to the term 'interdependency relationship'.

Under section 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.

Section 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 persons have an interdependency relationship, paragraph 302-200(3)(a) of the ITAA 1997 states that the regulations may specify the matters that are, or are not, to be taken into account.

In addition, paragraph 302-200(3)(b) of the ITAA 1997 states that the regulations may specify the circumstances in which two persons have, or do not have an interdependency relationship under subsections 302-200(1) and (2).

For the purposes of paragraph 302-200(3)(a) of the ITAA 1997 subregulation 302-200.01(2) of the Income Tax Assessment Regulations 1997 (ITAR 1997) sets out the matters to be taken into account in determining whether two persons have an interdependency relationship. These matters include all of the circumstances of the relationship between the persons, including (where relevant):

(i) the duration of the relationship; and

(ii) whether or not a sexual relationship exists; and

(iii) the ownership, use and acquisition of property; and

(iv) the degree of mutual commitment to a shared life; and

(v) the care and support of children; and

(vi) the reputation and public aspects of the relationship; and

(vii) the degree of emotional support; and

(viii) the extent to which the relationship is one of mere convenience; and

(ix) any evidence suggesting that the parties intend the relationship to be permanent; and

(x) the existence of a statutory declaration signed by one of the persons to the effect that they were in an interdependency relationship.

It is proposed to deal with each condition of subsection 302-200(1) of the ITAA 1997 in turn.

Close personal relationship:

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

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 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.

A close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not normally exist between two companions because there would not be a mutual commitment to a shared life between the two. In addition, the relationship between companions would be expected to change significantly over time.

The facts show that the Deceased and yourself were companions, to whom you are the sole beneficiary of the Deceased's estate. Clearly a close friendship existed between the Deceased and yourself prior to, and at the time of, the Deceased's death. Given that you and the Deceased had permanently and continuously lived together for a specified number of years in various locations, the Deceased and yourself had of course known each other for some time.

In this case the Deceased suffered from various disabilities. As a result, the Deceased required constant care. You would arrange to take the Deceased to medical appointments, ensure the Deceased took prescribed medicines and also assisted with the Deceased's living arrangements (preparing meals and bathing for example).

In addition, you were receiving carer's benefits from Centrelink for the care you provided to the Deceased.

In respect of emotional support, it is accepted that both you and the Deceased provided a significant degree of mutual support to each other.

The facts of this case show that the relationship between the Deceased and you was over and above that of a companion relationship for adults living together. There is evidence of a mutual commitment to a shared life between the Deceased and yourself prior to and at the time of the Deceased's death.

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

Cohabitation:

The second requirement to be met is specified in paragraph 302-200(1)(b) of the ITAA 1997 and states the two persons live together.

The facts show that the Deceased lived with you together for a specified number of years and from 20XX, in a property you and the Deceased owned as tenants in common.

Therefore the requirement under paragraph 302-200(1)(b) of the ITAA 1997 has been met.

Financial support:

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

It is clear from the facts presented that the Deceased and you were financially dependent upon each other. You advised that together both you and the Deceased were required to meet the costs of running the household and paying bills, and towards the end of the Deceased's life you became dependent upon the Deceased financially as you had terminated your employment to become the Deceased's full time carer.

In this instance, both the existence and the level of financial assistance provided in the relationship between the Deceased and you are established and it is not necessary to look at the level of financial support provided, but merely to establish that such support existed.

Consequently, it is considered that paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied in this instance.

Domestic support and personal care:

The fourth requirement to be met is specified in paragraph 302-200(1)(d) of the ITAA 1997 and 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 term 'personal care' is also discussed in the New South Wales Supreme Court in Dridi v. Fillmore [2001] NSWSC 319. Master Macready stated, in regards to the term 'domestic support and personal care', that:

The expression [personal care] seems to be directed to a different level of reality such as assistance with mobility, personal hygiene and physical comfort. Such activities obviously however will include an element of emotional support.

From the facts provided, you provided domestic support to the Deceased including attending to household duties, cleaning, sanitisation and laundry. You also provided personal care in the form of personal hygiene oversight, medication compliance and blood sugar monitoring, nutrition and meal preparation for the Deceased. Further, you provided long-term emotional support to each other and relied upon each other for companionship.

Due to the Deceased's health issues the domestic support and personal care services that you provided are above that expected in an ordinary companion relationship.

On the facts provided, it is considered that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied in this instance.

Conclusion

As all conditions have been satisfied, it is accepted that you and the Deceased had an interdependency relationship. Therefore, in the period prior to and at the time of the Deceased's death you are considered to be a dependant of the Deceased for the purposes of subsection 302-200(1) of the ITAA 1997.