Edited version of your written advice

Authorisation Number: 1051192126036

Date of Advice: 23 February 2017

Ruling

Subject: Death Benefit - Interdependency

Question 1

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 just before they died?

Answer

Yes

This ruling applies for the following periods:

Income year ended 30 June 2017

The scheme commences on:

1 July 2016

Relevant facts and circumstances

The Beneficiary is a child of the Deceased aged more than 18 years.

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 302-200.0.1

Reasons for decision

Summary

An interdependency relationship as defined under section 302-200 of the ITAA 1997 existed between the Deceased and the Beneficiary just before the Deceased died. Therefore, the Beneficiary is a death benefits dependant of the Deceased as defined in section 302-195 of the ITAA 1997.

Detailed reasoning

Subsection 302-195(1) of the ITAA 1997 defines a death benefits dependant of a person who has died as:

the deceased person's *spouse or former spouse; or

the deceased person's *child, aged less than 18; or

any other person with whom the deceased person had an interdependency relationship under section 302-200 just before he or she died; or

any other person who was a dependant of the deceased just before he or she died.

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

As the Beneficiary is a child of the Deceased aged over 18, 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.

What is an interdependency relationship?

Subsection 302-200(1) of the ITAA 1997 states that two persons (whether or not related by family) have an interdependency relationship if:

they have a close personal relationship; and

they live together; and

one or each of them provides the other with financial support; and

one or each of them provides the other with domestic support and personal care.

Subsection 302-200(3) of the ITAA 1997 provides that matters and circumstances that are, or are not, to be taken into account in determining whether two persons have an interdependency relationship under that section may be specified in the regulations.

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 all relevant circumstances of the relationship between the persons, including (in this case):

the duration of the relationship; 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

Generally, a close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not exist between a parent and child. This is because the relationship between a parent and child would be expected to change significantly over time and there would be no mutual commitment to a shared life between the two. However, where, as in this case, unusual and exceptional circumstances exist, a relationship between a parent and child may be treated as an interdependency relationship for the purposes of subsection 302-200(1) of the ITAA 1997.

In this case, it is considered that the relationship between the Beneficiary and the Deceased was over and above that of a normal family relationship and that a close personal relationship existed as required by paragraph 302-200(1)(a) of the ITAA 1997.

The matters that indicate that the Beneficiary and the Deceased had a close personal relationship are:

the Beneficiary provided care to the Deceased a significant period of time;

the Beneficiary and the Deceased lived together until the death of the Deceased;

while the parties lived together, they provided each other with ongoing financial, domestic and emotional support;

the parties' behaviour indicates a mutual intention that their close familial relationship was permanent;

the Beneficiary's ongoing commitment to provide extensive emotional and domestic support and personal care to the Deceased indicates that their relationship was not one of mere convenience.

Living together

At the time of their death, the Beneficiary lived with the Deceased in the home which the Deceased owned.

Accordingly, paragraph 302-200(1)(b) of the ITAA 1997 is satisfied as the Deceased and the Beneficiary were living together at the time of the Deceased's death.

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 is being provided by one person (or each of them) to the other.

In this case, the Deceased provided the Beneficiary with complete financial support necessary to meet their day-to-day living expenses, including food and accommodation.

Therefore, it is considered that the Beneficiary and the Deceased provided financial support to each other as required under paragraph 302-200(1)(c) of the ITAA 1997.

Domestic support and personal care

Domestic support and personal care will be of a frequent and ongoing nature. For example, domestic support services will consist of attention 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.

In this case, the Beneficiary provided domestic support and personal care to the Deceased on an ongoing basis. This consisted of the Beneficiary undertaking tasks for the Deceased and providing the Deceased and assisting the Deceased with mobility.

Based on the above, the requirements of paragraphs 302-200(1)(a),(b), (c) and (d) of the ITAA 1997 are satisfied.

Consequently, the Beneficiary is a death benefits dependant of the Deceased for the purposes of section 302-195 of the ITAA 1997.