Edited version of private advice

Authorisation Number: 1052071887926

Date of advice: 8 February 2023

Ruling

Subject: Superannuation death benefits

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) by virtue of being in an interdependency relationship with the Deceased under section 302-200 of the ITAA 1997 just before they died?

Answer

Yes.

An interdependency relationship as defined under section 302-200 of the ITAA 1997 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 of the ITAA 1997.

This ruling applies for the following period:

Income year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The Deceased passed away on XX/XX/20XX.

The Beneficiary is a parent of the Deceased.

The Deceased never married and had no spouse or children.

In 20XX, the Deceased became ill and moved in with the Beneficiary on a permanent basis. They stopped working shortly after.

The Deceased resided with the Beneficiary for a period of XX years prior to their death

In 20XX, the Deceased was diagnosed with XXX. During this time, the Beneficiary cared for the Deceased on a part time basis.

In 20XX, the Deceased was diagnosed with XXX and the Beneficiary became their full-time carer.

In XX/20XX, the Deceased began XXX while preparing for XXX.

In the XX years prior to their death, the Deceased was unable to work due to their illness and was fully dependant on the Beneficiary.

Until XX/20XX the Deceased received a fortnightly Centrelink payment of approximately $XX for unemployment due to disability. Thereafter they received a disability support pension from Centrelink of approximately $XX. In addition, in 20XX, the Deceased received a COVID Centrelink allowance. These payments were used to cover groceries, fuel, insurance premiums and mental well-being entertainment.

The Beneficiary received a fortnightly carers payment from Centrelink of $XX which assisted with medical and general costs associated with caring for the Deceased including the following:

•         special food requirements;

•         personal toiletries;

•         special recliner armchair;

•         electrical medical bed;

•         mobile phone bill;

•         mental health activities;

•         fuel costs/transportation to medical appointments;

•         insurance premium payments for the Deceased;

•         special pillows for the Deceased;

•         XXX; and

•         bed and bedding protection (against blood spillage).

The Beneficiary paid for approximately XX% of the Deceased's expenses, including their private health insurance.

The Beneficiary relied on the Deceased's Centrelink payments to assist with the medical and general costs associated with caring for them.

The Deceased relied on the Beneficiary's Centrelink payments to assist with the medical and general costs associated with their care.

The Beneficiary provided the Deceased with ongoing domestic support and personal care, including the following:

•         cooking meals;

•         assisting the Deceased with laundry and cleaning;

•         providing personal assistance to the Deceased; and

•         driving the Deceased to their medical appointments.

On XX/XX/20XX, XX Superannuation Fund paid a death benefit of $XX to the Beneficiary.

The PAYG Payment Summary notes the following:

Taxed element: $XX

Untaxed element: $XX

Tax free component: $XX

The Beneficiary has provided a medical certificate which states that they were the Deceased's sole carer in the lead up to the Deceased's death.

The Beneficiary has provided a Statutory Declaration stating:

•         The Deceased lived with the Beneficiary up to their death

•         The Beneficiary was a full-time carer of the Deceased up to their death

•         The Deceased relied on the Beneficiary for financial, emotional and medical support during their illness and up to their death

•         The Beneficiary relied financially on the Deceased's Centrelink payments to assist with medical and general costs associated with caring for them

•         The Deceased relied on the Beneficiaries Centrelink Carer's payment to assist with medical and general costs associated with caring for them.

Relevant legislative provisions

Income Tax Assessment Act 1997Section 302-195.

Income Tax Assessment Act 1997 Section 302-200.

Income Tax Assessment Regulations 1997 Regulation 302-200.0.1

Reasons for decision

Summary

An interdependency relationship as defined under section 302-200 of the ITAA 1997 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 of the ITAA 1997.

Detailed reasoning

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.

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

(a)  matters that are, or are not, to be taken into account in determining under subsection (1) or (2) whether 2 persons have an interdependency relationship; and

(b)  circumstances in which 2 persons have, or do not have, an interdependency relationship

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 (in this case):

•         the duration of the relationship; and

•         the ownership use and acquisition of property; and

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

•         the degree of emotional support; 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.

Close personal relationship

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.

This requirement is common to all of the tests specified in section 302-200 of the ITAA 1997 and regulation 302-200.02 of the ITAR 1997.

A detailed explanation of subsection 302-200(1) of the ITAA 1997 is set out in the Supplementary Explanatory Memorandum (SEM) to the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004 which inserted former section 27AAB of the Income Tax Assessment Act 1936 (ITAA 1936). In discussing the meaning of close personal relationship the SEM states:

2.12 A close personal relationship will be one that involves a demonstrated and ongoing commitment to the emotional support and well-being of the two parties.

2.13 Indicators of a close personal relationship may include:

•         the duration of the relationship;

•         the degree of mutual commitment to a shared life;

•         the reputation and public aspects of the relationship (such as whether the relationship is publicly acknowledged).

2.14 The above indicators do not form an exclusive list, nor are any of them a requirement for a close personal relationship to exist.

2.15 It is not intended that people who share accommodation for convenience ( flat mates), or people who provide care as part of an employment relationship or on behalf of a charity should fall within the definition of close personal relationship.

In the Explanatory Statement to the Income Tax Amendment Regulations 2005 (No. 7) which inserted Regulation 8A into the ITR 1936, it stated that:

'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.'

As stated above, the intention of the law is that a close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 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. It would be expected that the adult child would eventually move out and secure independence from their parents.

In this instance, even though the Deceased was a child of the Beneficiary they suffered from XXX. As the medical condition progressed, the Deceased required constant care. The Beneficiary took the Deceased to their medical appointments and assisted with the Deceased's living arrangements, including providing personal assistance and cooking meals.

In addition, the Beneficiary received a carer's allowance from Centrelink as they cared first part-time and then full-time for the Deceased.

The facts of this case show that the relationship between the Deceased and the Beneficiary was over and above that of a normal family relationship between a parent and child living together. There is evidence of a mutual commitment to a shared life between the Deceased and the Beneficiary in the years prior to and at the time of the Deceased's death.

Therefore, it is accepted that a close personal relationship existed between the Beneficiary and the Deceased as envisaged by paragraph 302-200(1)(a) of the ITAA 1997.

Living together

The phrase 'live together' is not defined in the ITAA 1997 or accompanying regulations. According to the Macquarie Dictionary, the term 'live' means to dwell or reside. The term 'reside' is defined as the action of dwelling in a particular place permanently or for a considerable time.

Therefore, as paragraph 302-200(1)(b) of the ITAA 1997 requires that the persons live together, it is considered in the context of the provision, that the living arrangements must have some degree of permanency.

In determining if the persons live together it is relevant to have regard to 'the degree of mutual commitment to a shared life' and 'any evidence suggesting that the parties intend the relationship to be permanent'.

In this instance, the Beneficiary resided with the Deceased for a period of XX years prior to their death. Due to their illness, this arrangement was intended to be a permanent one.

Therefore, it is considered that the Beneficiary and the Deceased lived together.

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 was provided by one person (or each of them) to the other, for example providing support for a person's household and/or medical expenses.

In this instance, the facts indicate that the Beneficiary and the Deceased provided financial support to one another by sharing all household expenses such as grocery bills and petrol costs. The Beneficiary has estimated that they covered XX% of the Deceased's expenses.

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.

The facts presented indicate that the Beneficiary provided the Deceased with domestic support and personal care on an ongoing basis. The Beneficiary provided personal care assistance to the Deceased as well as undertaking household tasks such as cooking and cleaning. The Beneficiary also drove the Deceased to their medical appointments and made purchases to make the Deceased's life more comfortable, including provided special pillows and bedding.

It is therefore considered that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied in this instance.

Based on the above, the Beneficiary meets all the requirements of an interdependency relationship for the purposes of subsection 300-200(1) of the ITAA 1997. Therefore, the Beneficiary is a death benefits dependent of the Deceased for the purposes of section 302-195 of the ITAA 1997.

Consequently, it is not necessary to consider whether the Beneficiary is a dependant of the deceased under paragraph 302-195(1)(d) of the ITAA 1997.