Edited version of private advice

Authorisation Number: 1051525522275

Date of advice: 5 June 2019

Ruling

Subject: Superannuation death benefits

Question

Are you a death benefits dependant of the deceased in accordance with section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following period

Income year ended 30 June 2018

The scheme commenced on

1 July 2017

Relevant facts and circumstances

The Deceased passed away as a result of a medical condition.

The Deceased was single and resided with their parents.

The residence is owned by their parents. Neither parent received a carers allowance or payment.

The Deceased and you provided each other with the usual level of mutual domestic help as one would expect in circumstances that an adult child lives with their parents. The Deceased also contributed to maintenance of the house, utility bills and grocery bills.

The parents loaned approximately $X to the Deceased to buy a vehicle. At the date of death, the vehicle was worth $X.

The Deceased had accounts with several superannuation funds.

Several death benefit payments were made to you as a non-dependant beneficiary.

One death benefit payment was made to you as a dependant beneficiary.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 302-195

Income Tax Assessment Act 1997 Section 302-200

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

Income Tax Assessment Act 1997 Subsection 302-200(2)

Income Tax Assessment Act 1997 Subsection 302-200(3)

Income Tax Assessment Regulations 1997 Subregulation 302-200.01

Income Tax Assessment Regulations 1997 Subregulation 302-200.02

Reasons for Decision

Summary

You are not a death benefits dependant of the Deceased for the purposes of section 302-195 of the ITAA 1997.

Detailed reasoning

Death benefits dependant

Section 302-195 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 person just before he or she died.

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

As you are 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 you are death benefits dependant of the Deceased, it must be established that you had an interdependency relationship with the Deceased just before the Deceased died, or that you were a dependant of the Deceased just before the Deceased died.

Interdependency relationship

Subsection 302-200(1) of the ITAA 1997 provides that two persons (whether or not related by family) have an interdependency relationshipunder section 302-200 of the ITAA 1997 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) provides that the matters to be taken into account for the purposes of paragraph 302-200(3)(a) of the ITAA 1997 (where relevant) are all the circumstances of the relationship between the persons, including (in this case):

(i)   the duration of the relationship; and ...

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

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

(vi) the reputation and public aspects of the relationship; and

(vii) the degree of emotional support; and

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

(ix)any evidence suggesting that the parties intend the relationship to be permanent, and ...

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

2 persons have an interdependency relationship if:

(a) they satisfy the requirements of paragraphs 302-200(1)(a) to (c) of the Act; and

(b) 1 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 mere friend or flatmate.

Examples of care normally provided in a close personal relationship rather than by a friend or flatmate

1. Significant care provided for the other person when he or she is unwell.

2. Significant care provided for the other person when he or she is suffering emotionally.

Close personal relationship

The wording of subsection 302-200(1) of the ITAA 1997 has a cumulative effect, that is, all the conditions in that subsection are joined and must be read together. Therefore, for an interdependency relationship to exist, all the conditions of subsection 302-200(1) must be met. If any one of the specified conditions in that subsection is not met, there is no interdependency relationship.

The first condition that must be satisfied is that there was a close and personal relationship (paragraph 302-200(1)(a) of the ITAA 1997).

A close personal relationship is generally one that involves a demonstrated and ongoing commitment to the emotional support and well-being of the two parties. Indicators of a close personal relationship may include the duration of the relationship and the degree of mutual commitment to a shared life.

Generally, a close personal relationship as specified in paragraph 302-200(1)(a) of the ITAA 1997 would not exist between parents and children. This is because one expects the child to establish their independence and eventually move out of the parental home and there would be no mutual commitment to a shared life between the two. However, where unusual and exceptional circumstances exist, a relationship between 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, the facts do not indicate that a situation of unusual or exceptional circumstances existed. The Deceased was an adult child of you who lived at the same residence. While they cohabitated, there is nothing to indicate a level of commitment to a shared life or a level of care above what would be normal or expected of an adult child living at home with a parent.

While it is noted that:

(a)   You and the Deceased provided each other with support for people sharing a living space;

(b)   The parents provided a loan to the Deceased for the purchase of a vehicle;

(c)   The Deceased contributed ad hoc amounts to expenses such as house maintenance, utility bills and grocery bills.

It is not considered that these actions demonstrate a level of care or commitment above what is considered normal for a child living at home with their parents.

Consequently, while it is accepted that you and the Deceased had a close parent/child relationship, it is not considered that a close personal relationship existed between you and the Deceased as contemplated in paragraph 302-200(1)(a) of the ITAA 1997.

As the first condition of subsection 302-200(1) of the ITAA 1997 is not met, you and the Deceased did not have an interdependency relationship under section 302-200 of the ITAA 1997 just before the Deceased died.

Further, based on the facts provided, there is nothing to indicate that you were a financial dependant of the Deceased at the time of death.

Therefore, you are not a death benefits dependant of the Deceased as defined in section 302-195 of the ITAA 1997.