Edited version of your written advice

Authorisation Number: 1012972677680

Date of advice: 22 February 2016

Ruling

Subject: Superannuation death benefits

Question

Is a person (Your Client) a death benefits dependant of a person who has died (the Deceased) as defined in section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

This ruling applies for the following periods:

Income year ended 30 June 2015

The scheme commences on:

1 July 2014

Relevant facts and circumstances

The Deceased died in the 2013-14 income year. The cause of death was an ongoing chronic disease.

Your Client is the child of the Deceased. At the time of the Deceased's death they were aged over 18.

Your Client lived with their parents until the parents separated. Following the separation, Your Client lived with each parent at different times.

At the time of the Deceased's death, Your Client lived primarily with the Deceased in order to provide them with personal and domestic support they needed as a result of the progression of their illness.

Your Client gave up paid work in order to care for the Deceased. They assisted the Deceased with day-to-day activities including cooking, eating, clothing and personal hygiene, as well as taking them to and from medical appointments and hospitals.

Your Client also provided the Deceased with domestic support such as gardening, laundry and cleaning.

The Deceased was also assisted by paid carers who visited the Deceased in their home and occasionally stayed, however these carers did not reside there on a permanent basis.

During the months prior to the Deceased's death, Your Client relied on the Deceased for accommodation as well as the funds required to cover their living expenses.

Your Client's only other source of income was a Centrelink carers' payment, and regular funds transfers from the Deceased.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 302-195

Income Tax Assessment Act 1997 Section 302-200

Income Tax Assessment Regulations 1997 Regulation 302-200.01

Income Tax Assessment Regulations 1997 Regulation 302-200.02

Reasons for decision

Summary

An interdependency relationship as defined under subsection 302-200(1) of the ITAA 1997 existed between Your Client and the Deceased just before the Deceased died. Therefore, Your Client is considered to be a death benefits dependant of the Deceased.

Detailed reasoning

Relevantly, section 302-195 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.

*To find definitions of asterisked terms, see the Dictionary, starting at 995-1

As Your Client is a child of the Deceased who was over 18 years of age when the Deceased died, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 do not apply in this case. Therefore, to conclude that Your Client is a death benefits dependant of the Deceased, it must be established that Your Client had an interdependency relationship with the Deceased; or that they were a dependant of the Deceased just before the Deceased died.

Meaning of interdependency relationship

In accordance with subsection 302-200(1) of the ITAA 1997, 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.

To assist in determining whether two persons have an interdependency relationship, subsection 302-200(3) of the ITAA 1997 states that the regulations may specify the matters and circumstances that are, or are not, to be taken into account.

To that effect, subregulation 302-200.01(2) of the Income Tax Assessment Regulations 1997 (ITAR 1997) states the matters to be taken into account are all of the relevant circumstances of the relationship between the persons, including (in this case):

(i) the duration of the relationship; and …

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

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

In the Explanatory Statement to the Income Tax Amendment Regulations 2005 (No. 7) (ES) which inserted former regulation 8A of the Income Tax Assessment Regulations 1936 - the immediate predecessor to regulation 302-200.01 of the ITAA 1997- states:

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

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

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) Bill 2003 which inserted former section 27AAB of the ITAA 1936 - the immediate predecessor to section 302-200 of the ITAA 1997. 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.

The ES expends on the meaning of close personal relationship and states:

The preparation of a meal or assistance with medication when a person is unwell would not normally of itself satisfy this provision. More likely the kind of care and support normally provided in a close personal relationship would extend to constant care (for example, overnight), attending medical appointments with the person or the provision of personal and physical assistance where required.

As stated above, a close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not normally exist between parents and their adult children. This is because there would not be a mutual commitment to a shared life between the two. A relationship between a parent and an adult child 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, as in this case, 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 section 302-200 of the ITAA 1997.

In this case, a close familial relationship existed between Your Client and the Deceased prior to, and at the time of the Deceased's death that was over and above that of a normal relationship between a parent and an adult child. This was demonstrated in a number of ways such as the personal care and physical assistance that Your Client provided to the Deceased during their illness.

Your Client had lived with the Deceased for most of their life - the only other place of residence being their parents' home. As the Deceased's illness progressed, Your Client extended their stay at the Deceased's residence, thus making it their primary residence, to assist the Deceased with personal care and domestic support they required due to their illness.

In addition, during the time Your Client stayed with the Deceased, the Deceased provided Your Client with a place to live and financial support necessary to meet their day-to-day living expenses. Evidence indicates that Your Client relied on that support for their normal standard of living

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 facts presented show that Your Client provided to the Deceased frequent and ongoing domestic support services and personal care of the nature discussed above.

As all of the requirements which are set out in subsection 302-200(1) of the ITAA 1997 have been satisfied in this case, it is considered that the Deceased and Your Client had an interdependency relationship at the time of the Deceased's death. Therefore, Your Client is a death benefits dependant under paragraph 302-195(1)(c) of the ITAA 1997.

Consequently, it is not necessary to consider whether Your Client was a dependant of the Deceased under paragraph 302-195(1)(d) of the ITAA 1997 just before they died.