Edited version of your written advice

Authorisation Number: 1051299214586

Ruling

Subject: Death Benefit - Interdependency

Question 1

Did an interdependency relationship as defined under section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997) exist between a person who has died (the Deceased) and another person (the Taxpayer) just before the Deceased died?

Answer

Yes

This ruling applies for the following periods:

Income year ended 30 June 2016

The scheme commences on:

1 July 2015

Relevant facts and circumstances

The Deceased died following a long illness.

The Taxpayer is a sibling of the Deceased.

Neither the Taxpayer nor the Deceased had any children nor were they married.

The Taxpayer and the Deceased purchased a house where they lived together with their elderly parents. The purchase of the house was financed through a joint mortgage.

The Taxpayer and the Deceased had a joint bank account which was used to pay the mortgage and expenses associated with their house.

The Taxpayer and the Deceased had mutual Wills appointing each other as executors and beneficiaries.

The Taxpayer and the Deceased shared household duties to provided support and care to each other and their ageing parents. The Taxpayer generally did the laundry and vacuuming whereas the Deceased did dusting, cooking and general cleaning.

After the Deceased became ill, the Taxpayer provided personal care and emotional and domestic support to the Deceased including the following:

● persuading the Deceased to undertake recommended treatment for their illness

● accompanying the Deceased to treatment sessions to provide emotional support

● attending medical appointments with the Deceased

● shopping for the Deceased’s personal items and clothing

● as the Deceased’s illness progressed, the Taxpayer reduced their working hours in order to provide more extensive care and support to the Deceased such as assisting the Deceased with feeding, washing, and taking their medication; and

● visiting the Deceased in the hospital daily, and staying overnight at times, to provide them with emotional support and ensure their personal comfort.

The Taxpayer has signed a Statutory Declaration stating that they were in an interdependency relationship with the Deceased just before they died.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 302-200,

Income Tax Assessment Act 1997 Subsection 302-200(1),

Income Tax Assessment Act 1997 Section 302-195 and

Income Tax Assessment Act 1997 Subsection 302-195(1).

Income Tax Assessment Regulations 1997 regulation 302-200.01

Income Tax Assessment Regulations 1997 regulation 302-200.02

Reasons for decision

Interdependency Relationship

Under subsection 302-200(1) of the ITAA 1997, two people (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.

Subsection 302-200(3) of the ITAA 1997 provides the matters and circumstances which are considered in determining whether an interdependency relationship exists between two person under that section may be specified in the regulations.

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

(a) the duration of the relationship; and

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

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

(d) the degree of emotional support; and

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

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

(g) the existence of a statutory declaration signed by one of the persons to the effect that the person is, or was, in an interdependency relationship with the other person.

In accordance with regulation 302-200.02 of the ITAR 1997, two persons have an interdependency relationship if they satisfy the requirements of paragraphs 302-200(1)(a) to (c) of the ITAA 1997 and one or each of them provides the other with support and care of a type and quality normally provided in a close personal relationship, rather than a mere friend or flatmate. For example, significant care provided to another person when they are unwell or when they are suffering emotionally.

Generally, a close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not exist between siblings who live together. This is because the relationship between siblings 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 exception circumstances exist, a relationship between siblings may be treated as an interdependency relationship for the purposes of subsection 302-200(1) of the ITAA 1997.

The relationship between the Taxpayer and the Deceased was over and above that of a normal relationship for two siblings living together. They purchased a home where they lived together, held bank accounts in joint names and shared household expenses. Therefore, there is, in this case, evidence of a mutual commitment to a shared life between the Taxpayer and the Deceased.

The facts show that a close familial relationship existed between the Taxpayer and the Deceased, not only at the time of the Deceased’s death, but also for many years prior to the death. This was demonstrated in a number of ways such as the on-going support the two provided to each other over the years and the personal care and support the Taxpayer provided to the Deceased during the time the Deceased suffered from a serious illness. This is far beyond what might be expected from a friend or flatmate.

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

Living together

At the time of the Deceased’s death, the Taxpayer and the Deceased lived together in a house they bought together as tenants in common.

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 Taxpayer and the Deceased held a joint bank account. Their mortgage and household expenses were paid from the jointly held bank account. Therefore, it is considered that they each provided financial support to the other

Domestic support and personal care

For the purposes of paragraph 302-200(1)(d) of the ITAA 1997, 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 activities. Personal care services may commonly consist of assistance with mobility, personal hygiene and generally ensuring the physical and emotional comfort of a person.

The Taxpayer and the Deceased shared many household duties to provide support and care to each other and their parents. For example, the Taxpayer did the laundry and vacuuming while the Deceased did dusting, cooking and general cleaning.

Furthermore, when the Deceased became ill, the Taxpayer accompanied the Deceased to doctors’ appointments and treatment sessions. During the times that the Deceased was hospitalised, the Taxpayer visited the Deceased daily to provide physical and emotional support to the Deceased.

Based on the above, the Taxpayer and the Deceased satisfy all the conditions of subsection 302-200(1) of the ITAA 1997.

Therefore, an interdependency relationship, as defined under section 302-200 of the ITAA 1997, existed between the Taxpayer and the Deceased just before they died.