Edited version of private advice

Authorisation Number: 1051625750075

Date of advice: 14 January 2020

Ruling

Subject: Superannuation death benefit

Question

Did an interdependency relationship exist between the Deceased and the mother under section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

This ruling applies for the following period:

Income year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The Deceased lived at home with the mother after the father passed away. They lived together continuously for the next XX years.

The Deceased never married and had no dependants.

During the time they lived together, they shared the cost of living expenses and provided each other with financial and emotional support. They constantly travelled together, often travelling together on an annual basis. The Deceased would assist the mother by shopping and driving her to medical appointments and fulfilling other transport needs, as well as assisting with domestic duties and with maintenance of the garden.

The Deceased was diagnosed with a serious illness X years ago.

The Deceased had to attend medical treatments and the Deceased's mother assisted the Deceased though the illness and treatment. This assistance included cooking meals, laundry, cleaning, as well as providing emotional support during this time.

The Deceased passed away in the 20XX-XX income year.

The Deceased was a member of the Fund.

After the Deceased's death, the trustee of the Fund determined that a death benefit was payable to the Deceased's mother. The benefit was to be paid entirely tax free to the Deceased's mother, the trustee of the Fund finding that the Deceased and her mother met the definition of an interdependency relationship.

For a number of reasons, a request was made to the trustee of the Fund to instead pay the proposed death benefit to the estate of the Deceased.

The trustee of the Fund allowed the request and the Fund paid a death benefit to the Deceased's estate in the 20XX-XX income year. No tax was withheld by the Fund from the death benefit.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 302-10

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 Act 1997 Subsection 302-200(2)

Income Tax Assessment Act 1997 Paragraph 302-200(3)(a)

Income Tax Assessment Regulations 1997 Subregulation 302-200.01(2)

Income Tax Assessment Regulations 1997 Regulation 302-200.02

Reasons for decision

Summary

An interdependency relationship as defined under subsection 302-200(1) existed between the Deceased and the mother just before the Deceased died.

Therefore, in relation to the death benefit paid to the estate of the Deceased, the Deceased is a death benefits dependant of the mother as defined in subsection 302-195(1).

Detailed reasoning

Superannuation death benefits paid to the trustee of a deceased estate

A payment made by a superannuation fund to a deceased estate after the death of the deceased is assessed as a death benefit under section 302-10.

The taxation arrangements that apply to this superannuation death benefit are determined in accordance with the taxation arrangements that would otherwise apply to the person or persons otherwise intended to benefit from the estate.

For example, where a dependant of the deceased receives part, or all of, a superannuation death benefit and has benefited, or is expected to benefit, the trustee will not be subject to tax on that part of the benefit paid to the dependant as if it were paid to a dependant of the deceased.

Death benefits dependant

Subsection 302-195(1) defines a death benefits dependant as follows:

A death benefits dependant, of a person who has died, is:

(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.

In this case, the facts show that for the purposes of subsection 302-195(1) the relevant provision that needs to be satisfied is paragraph 302-195(1)(c). That is, an interdependency relationship needs to be established between the Deceased and her mother just before the Deceased passed away.

Interdependency relationship

Under subsection 302-200(1) an interdependency relationship is defined as:

Two persons (whether or not related by family) have an interdependency relationship under this section 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(2) states:

In addition, 2 persons (whether or not related by family) also have an interdependency relationship under this section if:

(a) they have a close personal relationship; and

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

(c) the reason they do not satisfy those requirements is that either or both of them suffer from a physical, intellectual or psychiatric disability.

Accordingly, all of the conditions in subsection 302-200(1), or alternatively subsection 302-200(2), must be satisfied for a person to be in an interdependency relationship with another person.

Relevantly in this case, focus will be on whether an interdependency relationship existed with another person(s) under subsection 302-200(1).

To assist in determining whether two persons have an interdependency relationship, paragraph 302-200(3)(a), states that the regulations may specify the matters that are, or are not, to be taken into account.

Subregulation 302-200.01(2) of the Income Tax Assessment Regulations 1997 (ITAR 1997) states the matters to be taken into account are as follows:

(a) all of the circumstances of the relationship between the persons, including (where relevant):

(i) the duration of the relationship; and

(ii) whether or not a sexual relationship exists; and

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

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

(v) the care and support of children; 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.

Close personal relationship

The first requirement to be met is specified in paragraph 302-200(1)(a) is that two persons (whether or not related by family) must have a close personal relationship.

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) would not exist between a parent and a child. This is because the relationship between a parent and a 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).

In this case, it is considered that the relationship between the Deceased and her mother was over and above that of a normal family relationship, and beyond what might be expected of a friend or flatmate. A close personal relationship existed as required by paragraph 302-200(1)(a).

The matters that indicate that the Deceased and her mother had a close personal relationship are:

·         the Deceased lived with the mother for XX years;

·         significant personal and emotional support provided to the Deceased by the mother during the time the Deceased suffered from a serious illness; and

·         the fact that the Deceased had no dependants.

Living together

The second requirement to be met is specified in paragraph 302-200(1)(b), and states that the two persons live together.

The facts in this case show that the Deceased and the mother were living together at the time of the Deceased's death and accordingly paragraph 302-200(1)(b) has been satisfied in this instance.

Financial support

The third requirement to be met is specified in paragraph 302-200(1)(c), and states that one or each of them provides the other with financial support.

Financial support under paragraph 302-200(1)(c) 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 Deceased assisted with the cost of living expenses, utilities and the mother's transport needs as well as general financial support as required.

It is therefore considered that paragraph 302-200(1)(c) has been satisfied.

Domestic support and personal care

The fourth requirement to be met is specified in paragraph 302-200(1)(d) and states that one or each of these two persons provides the other with domestic support and personal care.

For the purposes of paragraph 302-200(1)(d) 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 service may consist of assistance with mobility, personal hygiene and generally ensuring the physical and emotional comfort of a person.

From the facts provided, the Deceased's mother provided the Deceased with significant emotional support, as well as assistance with cooking, cleaning, laundry, and personal assistance during the period the Deceased was unwell and receiving chemotherapy and radiation therapy.

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

Conclusion

The Deceased and the mother had an interdependency relationship within the meaning of subsection 302-200(1).