Edited version of your written advice

Authorisation Number: 1051376421505

Date of advice: 22 May 2018

Ruling

Subject: Superannuation death benefits

Question

Is a person (the Beneficiary) a death benefits dependant of a person who has died (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?

Answer

Yes

This ruling applies for the following period:

Income year ending 30 June 201X

The scheme commences on:

1 July 201X

Relevant facts and circumstances

The Deceased died in 201X after prolonged illness.

The Beneficiary is a child of the Deceased and is over the age of 18 years.

Several years ago, the Deceased suffered a medical condition resulting in several serious illnesses. The ongoing and progressive effects of these illnesses restricted the Deceased’s ability to perform everyday physical tasks and, as their health continued to decline, they required ongoing care and support.

To care for the Deceased, the Beneficiary resigned from a medical practice in their home State and moved to the Deceased’s residence in another State.

The Beneficiary has not been engaged in paid employment since and has received a Centrelink Carers Allowance in relation to care of the Deceased.

During their illness, the Beneficiary provided the Deceased with ongoing support, including the following:

■ providing transportation for the Deceased to attend medical appointments and other engagements or activities;

■ overseeing the provision of medical treatment to ensure that the Deceased was properly cared for; and

■ attending to domestic and household duties such as cleaning, laundry, grocery shopping and meal preparation.

The Deceased provided the Beneficiary with ongoing financial support, including the following:

■ providing funds for all household expenses including groceries, property taxes and general maintenance; and

■ allowing the Beneficiary to reside at the residence without charging rent or board.

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.

Reasons for decision

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

(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 just before he or she died.

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

The Beneficiary is the Deceased’s child and is over the age of 18, so paragraphs (a) and (b) of subsection 302-195(1) of the ITAA 1997 do not apply. Therefore, in order 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:

(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 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):

(a) the duration of the relationship; and

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

(c) the degree of emotional support; and

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

(e) 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 gave up their medical practice and moved to another State to care for the Deceased;

■ the Beneficiary provided care to the Deceased over a prolonged period;

■ 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

Paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied as the Beneficiary was living with the Deceased at the time of his death.

Financial support

Financial support under paragraph 302-200(1)(c) of the ITAA 1997 is satisfied if some level of financial support is being provided by one person to the other.

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

The Beneficiary also contributed towards the household expenses while living with the Deceased.

Therefore, 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 must be of a frequent and ongoing nature. For example, domestic support services may consist of attention to household shopping, cleaning and laundry 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 household shopping, completing routine domestic tasks for the Deceased and providing the Deceased with personal care. This level of domestic support and personal care continued until just before the Deceased died.

Based on the above, the requirements of paragraphs 302-200(1)(a), (b) and (c) of the ITAA 1997 are satisfied. Therefore, the Beneficiary is a death benefits dependant of the Deceased for the purpose of section 302-195 of the ITAA 1997 by virtue of being in an interdependency relationship with the Deceased just before they died.

Consequently, it is not necessary to consider whether the Beneficiary was a dependant of the Deceased just before the Deceased died.