Edited version of your written advice

Authorisation Number: 1051399443350

Date of advice: 25 October 2018

Ruling

Subject: Death benefit payment to a dependent

Question

Are the Beneficiaries death benefits dependants of the Deceased as defined in section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No

This ruling applies for the following period:

Year ended 30 June 2016

The scheme commenced on:

1 July 2015

Relevant facts and circumstances

● The Beneficiaries were the parents of the Deceased.

● In early 2015 the Deceased passed away at the apartment.

● The Deceased never married nor had any children.

● On early-mid 2016, the Beneficiaries received superannuation death benefits from the complying superannuation funds which the Deceased was a member of.

● The Deceased rented the apartment, in order to attend medical appointments due to limited mobility and to assist with their mental health outlook.

● In mid-late 2014, the Deceased stopped working due to ill health.

● Since mid-late 2014, the Deceased lived with the Beneficiaries in the family home for most of the time.

● The Beneficiaries have signed a Statutory Declaration stating that they were in an interdependency relationship with the Deceased at the time of the Deceased’s death.

● The following information was provided:

● The Deceased’s had serious health conditions.

● For several years the Beneficiaries accompanied the Deceased to several of the doctors’ appointments.

● At the Beneficiaries’ instigation, the Deceased started to see the doctor following their declining health after mid-late 2014.

● The Beneficiaries regularly held the Deceased’s medication in safe keeping.

● The Deceased had attended several pain management clinics.

● The Beneficiaries were the Deceased’s only emotional support as they did not have a spouse or children and had lost their social circle.

● The Beneficiaries supplied the Deceased with domestic support, personal care and emotional care whilst they were at the family home

● The Beneficiaries provided the Deceased with financial support, including the rental payments for the apartment.

● The Deceased intended to live with the Beneficiaries permanently from early-mid 2015.

● The following documents were also provided:

● A letter from the GP about the medical conditions that the Deceased suffered from.

● The Deceased’s death certificate.

● The Coroner’s findings into how the Deceased passed away.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 302-195.

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

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

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 Regulations 1997 Regulation 302-200.01.

Reasons for decision

Meaning of death benefits dependant

Subsection 302-195(1) of the ITAA 1997 defines 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 the definition of the asterisked terms, see the Dictionary, starting at section 995-1

As the Beneficiary is a parent of the Deceased, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 do not apply in this case. 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:

(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 Regulations 1997 (ITAR 1997) states that in considering subparagraph 302-200(3)(a) of the ITAA 1997, matters to be taken into account are all the 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 reputation and public aspects of the relationship; 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 (in the case of a statutory declaration made after the end of the relationship) was, in an interdependency relationship.

Regulation 302-200.02 of the ITAR 1997 sets out the circumstances in which two persons have, or do not have, an interdependency relationship under section 302-200 of the ITAA 1997 and provides that interdependency relationship exists where:

● two persons satisfy the requirements of paragraphs 302-200(1)(a) to (c) 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 by a friend or flatmate (for example, significant care provided for the other person when they are unwell or suffering emotionally).

● two persons have a close personal relationship and they do not satisfy the other requirements set out in subsection 30-200(1) of the ITAA 1997 because they are temporarily living apart, for example, one of the persons is temporary working overseas, or two persons have a close personal relationship and they do not satisfy the other requirements set out in subsection 30-200(1) of the ITAA 1997 because either or both of them suffer from a disability.

Two persons do not, however, have an interdependency relationship if domestic support and personal care is provided by one person to the other under an employment contract or contract for services or on behalf of another person or organisation such as a charitable organisation (Subregulation 302-200.01(5) of the ITAR 1997.

Explanatory Statement to the Income Tax Amendment Regulations 2005 (No 7) which introduced regulations that specified matters that are, or are not, to be taken into account in determining whether two people have an interdependency relationship for the purposes of former section 27AAB of the Income Tax Assessment Act 1936 (ITAA 1936) – the immediate predecessor of section 302-200 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.

Each of the matters listed is to be given the appropriate weighting under the circumstances. The degree to which any matter is met or is present or not, as the case may be, does not necessarily of its own accord, confirm or preclude the existence of an interdependency relationship.

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

Close personal relationship

In this case, there are factors that indicate 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 as

● For several years the Beneficiaries accompanied the Deceased to several of their doctors’ appointments.

● The Beneficiaries regularly held the Deceased’s medication in safe keeping.

● The Beneficiaries were the Deceased’s only emotional support as they did not have a spouse or children and had lost their social circle.

● The Beneficiaries supplied the Deceased with domestic support, personal care and emotional care whilst they were at the family home

The Beneficiaries have provided a Statutory Declaration to the effect that the Beneficiaries and the Deceased were in an interdependency relationship as defined in section 302-200 of the ITAA 1997.

However, as per the Explanatory Statement, it is not expected that children will be in an interdependency relationship with their parents and in this case it is considered that some of the factors listed in regulation 302-200.01 of the ITAR 1997 are not met. These would be the degree of mutual commitment to a shared life, the extent to which the relationship is one of mere convenience and any evidence to indicate the relationship was intended to be permanent.

From the evidence provided, the Deceased lived independently of the Beneficiaries until they stopped work and continued to rent their apartment until their death. You have stated that they intended to live permanently with the Beneficiaries from early-mid 2015 but the information indicates this is due to financial and health factors so a decision made out of convenience and not a mutual commitment to a shared life with the Beneficiaries.

Living together

At the time of the death, the Deceased was at the apartment. The death certificate lists a period of four days that they could have passed away indicating the Deceased was alone at the time of death. The information you’ve provided indicates they were at the apartment at least a third of the time and their usual address was still listed as per apartment.

Accordingly, paragraph 302-200(1)(b) of the ITAA 1997 is not satisfied as the Deceased and the Beneficiary were not living together at the time of the Deceased’s death.

However, in accordance with subsection 302-200(2) of the ITAA 1997, two persons also have an interdependency relationship if:

● they have a close personal relationship; and

● they do not satisfy one or more of the requirements of an interdependency relationship mentioned in paragraphs (1)(b), (c) and (d); and

● the reason they do not satisfy those requirements is that either or both of them suffer from a physical, mental or psychiatric disability.

In this case, the evidence supplied does not indicate that the Deceased resided at the apartment due to physical, mental or psychiatric disabilities. Therefore, it is considered that the requirements in subsection 302-200(2) have not been satisfied in this instance.

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 facts indicate that the Beneficiaries provided the Deceased with financial support by providing financial support to the Deceased in the form of regular contributions of money towards household expenses, including utilities and groceries.

Whilst the Deceased lived in the family home, these living expenses included transportation expenses.

The Beneficiaries have provided evidence in the form of copies of money transfers and a copy of the Deceased’s financial position which highlighted a shortfall and thus the necessity of these money transfers.

Domestic support and personal care

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.

In this situation, the Beneficiaries provided domestic support and personal care to the Deceased on an ongoing basis, by assisting in:

● pain management;

● attending doctors’ appointments;

● medical planning and management;

● medicine management;

● cleaning, washing and meal preparation; and

Based on the level of domestic support and personal care provided to the Deceased by the Beneficiaries, we can state that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied.

Conclusion

Based on the above, the requirements of paragraphs 302-200(1)(c) and (d) of the ITAA 1997 are satisfied but the requirements of paragraphs 302-200(1)(a) and (b) of the ITAA 1997 are not satisfied. Therefore the Beneficiaries were not in an interdependency relationship with the Deceased when they passed away.