Edited version of your written advice

Authorisation Number: 1051518626120

Date of advice: 16 May 2019

Ruling

Subject: Superannuation death benefits – interdependency relationships

Question

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)?

Answer

Yes.

This ruling applies for the following period

Income year ended 30 June 2018

This scheme commences on:

1 July 2017

Relevant facts and circumstances

The Beneficiary’s parent (the Deceased), was the sole carer of the Beneficiary since the age of X.

The Deceased had no spouse and the Beneficiary was the Deceased’s only child.

The Beneficiary always lived at home with their parent until late 2015.

In late 2015 the Beneficiary temporarily left home to work away.

In early 2016 the Deceased was diagnosed with a serious medical condition.

The effects of the medical condition include memory loss, loss of motor skills and functions and impaired comprehension.

In early 2016 the Beneficiary left their job and returned home to care for and assist the Deceased through their illness as their health declined. This assistance included:

● weekly grocery shopping; cleaning; household assistance; helping with the garden;

● attending medical appointments and providing emotional support and care during times of high physical and emotional distress;

● providing financial support by contributing to household and fuel expenses.

In relation to the Deceased, they provided the beneficiary with ongoing domestic support and personal care including:

● cleaning; laundry; cooking meals; providing transport/driving the Beneficiary when required;

● providing emotional support and financial support which included the payment of utilities and household expenses.

The Deceased passed away in the 2016-17 income year.

In mid-2017 the trustee for a superannuation fund paid a superannuation death benefit to the Beneficiary.

The Beneficiary has signed a Statutory Declaration stating that they were in an interdependency relationship with the Deceased at the time of the Deceased’s death and that all information provided is true and accurate.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 302-60

Income Tax Assessment Act 1997 Section 302-195

Income Tax Assessment Act 1997 Section 302-200

Income Tax Assessment Act 1997 Section 302-300

Income Tax Assessment Regulations 1997 Regulation 302-200.01

Supplementary Explanatory Memorandum Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004

All references are to the ITAA 1997 unless otherwise indicated.

Reasons for decision

Summary

An interdependency relationship as defined under subsection 302-200(1) 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.

A superannuation lump sum death benefit

Under section 302-60, a superannuation lump sum death benefit received by a person who is a ‘death benefits dependant’ of the deceased, is not assessable income and is not exempt income.

Meaning of death benefits dependant

Subsection 302-195(1) 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 asterisked terms, see the Dictionary, starting at section 995-1.

As the Beneficiary is a child of the Deceased and over 18 years of age, paragraphs 302-195(1)(a) and (b) 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 the Beneficiary was a ‘dependant’ of the Deceased just before the Deceased died.

Interdependency relationship

Subsection 302-200(1) 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 302-300(3) provides that matters to be taken into account in determining whether two persons have an interdependency relationship under that section may be specified in the regulations. Regulation 302-200.01 of the Income Tax Assessment Regulations 1997 (ITAR 1997) states that in considering paragraph 302-200(3)(a), the matters to be taken into account are all the relevant circumstances of the relationship between the persons, including:

● the duration of the relationship; and

● the degree of mutual commitment to a shared life; and

● the reputation and public aspects of the relationship; and

● the degree of emotional support; and

● the care and support of children; 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; and

● 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.

Close personal relationship

A close personal relationship, as specified in subsection 302-200(1), would not normally exist between parents and their children because there would not be a mutual commitment to a shared life between the two. In addition, an adult child’s relationship with their parents would be expected to change significantly over time as the child moves out of home and obtained independence.

However, where 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 subsection 302-200(1).

Applying the above to 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).

The matters that indicate that the Beneficiary and the Deceased had a close personal relationship prior to the Deceased’s death are:

● the Beneficiary had lived with the Deceased all of their life.

● the Beneficiary is the Deceased’s only child and was the sole carer for the Deceased;

● the Beneficiary and the Deceased emotionally supported each other;

● the facts indicate that the relationship between the Deceased and the Beneficiary was likely to be permanent;

● there is nothing to indicate that the relationship was one of mere convenience; and

● the Beneficiary has provided a Statutory Declaration to the effect that the Beneficiary and the Deceased were in an interdependency relationship as defined in section 302-200.

Living together

The Deceased and the Beneficiary were living together at the time of the Deceased’s death and they had done so for the duration of the Deceased’s life. Therefore, paragraph 302-200(1)(b) has been satisfied.

Financial support

In Re Malek v. Federal Commissioner of Taxation Case [1999] AATA 678; (1999) 42 ATR 1203, (1999) 99 ATC 2294, Senior Member Pascoe of the Administrative Appeals Tribunal (AAT) expressed his view on financial support:

10. In my view, the question is not to be decided by counting up the dollars required to be spent on the necessities of life for [Mrs Malek], then calculating the proportion of those dollars provided by the [son] and regarding her as a dependant only if that proportion exceeds 50%...In my view, the relevant financial support is that required to maintain the person’s normal standard of living and the question of fact to be answered is whether the alleged dependant was reliant on the regular continuous contribution of the other person to maintain that standard.

In this case, the facts indicate that the Deceased provided financial support in the form of paying for daily expenses, utilities and groceries.

The Beneficiary provided financial support to the Deceased in the form of a regular weekly contribution of money towards the Deceased’s expenses, including utilities, groceries and petrol. The payment was regular and continuous until the Deceased’s death.

Accordingly, paragraph 302-200(1)(c) has been satisfied.

Domestic support and personal care

The meaning of domestic support and personal care was discussed in Supplementary Explanatory Memorandum Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004 and paragraph 2.16 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.

From the facts presented, the Beneficiary and the Deceased both provided domestic support and personal care to each other on an ongoing basis. This consisted of:-

● the Deceased doing the cleaning, the laundry, cooking meals, managing all the bills, providing transport and emotional care and support.

● the Beneficiary assisted the Deceased with basic household chores such as vacuuming, washing, gardening and attending medical appointments with the Deceased and providing emotional support and care at times of high physical and emotional distress.

It is therefore considered that paragraph 302-200(1)(d) has been satisfied in this instance.

The Beneficiary meets all the requirements of an interdependency relationship for the purposes of subsection 302-200(1). Therefore, the Beneficiary is a death benefits dependant of the Deceased for the purposes of section 302-195.

Consequently, it is not necessary to consider whether the Beneficiary is a ‘dependant’ of the Deceased under paragraph 302-195(1)(d).