Edited version of private advice

Authorisation Number: 1052225828980

Date of advice: 22 April 2024

Ruling

Subject: Superannuation death benefit - interdependency

Question 1

Was Beneficiary 1 a death benefits dependant of the Deceased according to section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997), due to being in an interdependency relationship with the Deceased under section 302-200 of the ITAA 1997?

Answer

No.

Question 2

Was Beneficiary 2 a death benefits dependant of the Deceased according to section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997), due to being in an interdependency relationship with the Deceased under section 302-200 of the ITAA 1997?

Answer 2

No.

Question 3

Was Beneficiary 3 a death benefits dependant of the Deceased according to section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997), due to being in an interdependency relationship with the Deceased under section 302-200 of the ITAA 1997?

Answer 3

No.

Summary

This ruling applies for the following period:

30 June 2022

The scheme commenced on:

xx/xx 2021

Relevant facts and circumstances:

Beneficiary 1, Beneficiary 2 and Beneficiary 3 (collectively, "the Beneficiaries") are the adult children of the Deceased.

The Deceased died in the 2022 income year.

Beneficiary 1 was born in 19xx and was therefore older than 18 years when the Deceased died.

Beneficiary 2 was born in 19xx and was therefore older than 18 years when the Deceased died.

Beneficiary 3 was born in 19xx and was therefore older than 18 years when the Deceased died.

The Beneficiaries are named in the Deceased's will as the beneficiaries of the balance of the estate once debts, funeral and testamentary expenses are paid for.

The Deceased's estate received death benefit payments from the Deceased's superannuation funds, on xx/xx 2022. No tax was withheld from either payment.

You applied for a private ruling.

In support of your application, you made the following statements:

a.    In 20xx, the Deceased was diagnosed with a serious illness.

b.    At that time, Beneficiary 1 was the only child living with the Deceased and became the primary carer.

c.     From mid-20xx onwards the Deceased was under palliative care and required constant supervision.

d.    During this period, the Deceased was unable to walk without assistance.

e.    Beneficiary 1 lived with the Deceased, in a property owned by the Deceased, henceforth referred to as 'the Residence', from 20xx to xx 20xx, when the Deceased was hospitalised prior to their death.

f.      Beneficiary 2 lived with the Deceased in the Residence from xx 20xx to xx 20xx, when the Deceased was hospitalised prior to their death.

g.    Beneficiary 2 resigned from their full-time position in xx 20xx and took a casual position to relocate to the Residence in order to provide care and support.

h.    Beneficiary 3 lived with the Deceased in the Residence from xx/xx 20xx to xx 20xx, when the Deceased was hospitalised prior to their death. Beneficiary 3 returned to their country of residence on xx/xx 20xx.

i.      Beneficiary 3 relocated from their country of residence for the above period in order to provide care and support to the Deceased.

j.      The Deceased provided the Beneficiaries with rent-free accommodation, payment of utilities and food.

k.     The Deceased provided Beneficiary 1 and Beneficiary 2 with financial support.

You summarised the support and care provided to the Deceased by the Beneficiaries as follows:

•         Beneficiary 1 cared for the Deceased from around 20xx to xx 20xx, when the Deceased was hospitalised, by providing:

                                  i.    domestic support, including attending to preparing meals, buying groceries and household cleaning

                                 ii.    personal care and assistance, including:

1.    transportation to medical appointments

2.    medication management, including collecting their prescriptions

3.    assisting them to walk, as well as providing other mobility support

4.    assisting them to eat and drink

                                iii.    emotional support, including providing:

1.    Comfort

2.    Palliative care

•         Beneficiary 2 cared for the Deceased from around xx 20xx to xx 20xx, when the Deceased was hospitalised, by providing:

                                  i.    domestic support, including attending to preparing meals, buying groceries and household cleaning.

                                 ii.    personal care and assistance, including:

1.    transportation to medical appointments

2.    medication management, including collecting their prescriptions

3.    assisting them to walk, as well as providing other mobility support

4.    assisting them to eat and drink

                                iii.    emotional support, including providing:

1.    Comfort

2.    Palliative care

•         Beneficiary 3 cared for the Deceased from xx/xx 20xx to xx/xx 20xx, when he returned to his country of residence, by providing:

                                  i.    domestic support, including attending to preparing meals, buying groceries and household cleaning

                                 ii.    personal care and assistance, including:

1.    transporting them to medical appointments

2.    transporting them to lawyer's appointments

3.    assisting after falls

                                iii.    emotional support, including providing:

1.    Comfort and company

2.    Palliative care

You summarised the financial support provided between the Deceased and the Beneficiaries as follows:

•         The Deceased provided financial support to Beneficiary 1 from xx/xx 20xx to xx/xx 20xx by:

                                  i.    paying for:

1.    utilities

2.    groceries; and

                                 ii.    providing rent-free accommodation

•         The Deceased provided financial support to Beneficiary 2 from late 20xx to xx/xx 20xx by:

                                  i.    paying for:

1.    utilities

2.    groceries; and

                                 ii.    providing rent-free accommodation

•         The Deceased provided financial support to Beneficiary 3 from xx/xx 20xx to xx/xx 20xx by:

                                  i.    paying for utilities; and

                                 ii.    providing rent-free accommodation.

•         Beneficiary 3 provided financial support for the Deceased by paying for groceries and meals.

In support of your application, you have provided the following documentation:

•         Grant of probate with annexed statement of assets and liabilities.

•         Death certificate of the Deceased

•         A doctor's certificate dated xx/xx 2018 from the Deceased's registrar oncologist in support of the care provided by Beneficiary 1 advising that, "significant care" was provided to the Deceased at that time.

•         A doctor's certificate dated xx/xx 2023 from the Deceased's general practitioner in support of the care provided by Beneficiary 1 and Beneficiary 2. The letter advised that both Beneficiary 1 and Beneficiary 2 were the Deceased's 'ongoing primary carers' and provided assistance with:

                                  i.    Attendance at regular appointments

                                 ii.    Household duties

                                iii.    Personal hygiene

                               iv.    Administration of medication

•         A copy of both Beneficiary 1 and Beneficiary 2's driver's licenses.

•         A copy of the record of professional placement attendance for Beneficiary 1, showing absences on xx/xx 20xx and xx/xx 20xx due to family issues.

•         PAYG Payment Summary - superannuation lump sum - for the year ending 30 June 20xx, with the following details:

                                  i.    Payer - xxxxx

                                 ii.    Payee - The Estate of xxxxx

                                iii.    Date of payment - xx/xx 20xx

                               iv.    Taxable component - taxed element - $xx,xxx.xx

                                 v.    Taxable component - untaxed element - $xxx,xxx.xx

                               vi.    Tax-free component - $x,xxx.xx

                              vii.    Total tax withheld - $x

•         PAYG Payment Summary - superannuation lump sum - for the year ending xx/xx 20xx, with the following details:

                                  i.    Payer - xxxxx

                                 ii.    Payee - The Estate of xxxxx

                                iii.    Date of payment - xx/xx 20xx

                               iv.    Taxable component - taxed element - $xxx,xxx.xx

                                 v.    Taxable component - untaxed element - $x

                               vi.    Tax free component - $x

                              vii.    Total tax withheld - $x

•         Bank statements of Beneficiary 1, addressed to the Residence, for parts of the 20xx, 20xx, and 20xx income years.

•         Bank statements of Beneficiary 2, addressed to the Residence, for parts of the 20xx and 20xx income years.

•         Bank statements of Beneficiary 3 for parts of the 20xx and 20xx income years.

•         Unsigned statements from each of the Beneficiaries in support of the personal care provided to the Deceased.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 302-60

Income Tax Assessment Act 1997 Section 302-145

Income Tax Assessment Act 1997 Section 302-195

Income Tax Assessment Act 1997 Section 302-200

Income Tax Assessment (1997 Act) Regulations 2021 Section 302-200.01

Income Tax Assessment (1997 Act) Regulations 2021 Section 302-200.02

Reasons for decision:

Detailed reasoning

1.    Subsection 995-1(1) of the ITAA 1997 states that the term 'death benefits dependant' has the meaning given by section 302-195 of the ITAA 1997. Subsection 302-195(1) of the ITAA 1997 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 dependent of the deceased just before he or she died.

2.    As the Beneficiaries are the adult children of the Deceased, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 are not applicable.

3.    The definition of death benefits dependant does not stipulate the nature or degree of dependency required to be a dependant of the deceased person in paragraph 302-195(1)(d) of the ITAA 1997. However, it is generally accepted that this paragraph refers to financial dependence.

4.    The Beneficiaries were not financially dependent on the Deceased and therefore, paragraph 302-195(1)(d) of the ITAA 1997 is not applicable.

5.    To meet the definition of a death benefits dependant, the Beneficiaries must have been in an interdependency relationship with the Deceased, in accordance with paragraph 302-195(1)(c) of the ITAA 1997.

Interdependency relationship

6.    Under subsection 302-200(1) of the ITAA 1997, 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.

7.    Subsection 302-200(2) of the ITAA 1997 states:

In addition, two 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 the 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.

8.    To assist in determining whether two people have an interdependency relationship, paragraph 302-200(3)(a) of the ITAA 1997 provides that the regulations may specify the matters that are or are not to be taken into account.

9.    Subsection 302-200.01(2) of the Income Tax Assessment (1997 Act) Regulations 2021 (ITAR 2021) states the matters to be taken into account. These matters are all of the circumstances of the relationship between the persons, including (where relevant):

a.    the duration of the relationship

b.    the ownership, use and acquisition of property

c.     the degree of mutual commitment to a shard life

d.    the reputation and public aspects of the relationship'

e.    the degree of emotional support

f.      the extend to which the relationship is one of convenience

g.    any evidence that the parties intend the relationship to be permanent

10.  Paragraph 302-200(3)(b) of the ITAA 1997 states that the regulations may specify the circumstances in which two people have, or do not have an interdependency relationship.

11.  Section 302-200.02 of the ITAR 2021 sets out the circumstances in which two people have an interdependency relationship.

12.  Subsection 302-200.02(2) of the ITAR 2021 provides that an interdependency relationship exists between two people where:

a.    they satisfy the requirements of paragraph 302-200(1)(a) to (c) of the ITAA 1997; and

b.    one or both of them provided the other with support and care of a type and quality normally provided in a close personal relationship rather than by mere friend or flatmate, for example one person provided significant care for the other person when they are unwell or suffering emotionally.

13.  Subsections 302-200.02(3) and (4) of the ITAR 2021 provide that an interdependency relationship also exists between two people where:

a.    they have a close personal relationship; and

b.    they do not satisfy one or more of the requirements set out in subsection 302-200(1) of the ITAA 1997 because:

                                                                  i.    they are temporarily living apart, for example because on of them is temporarily working overseas or in gaol; or

                                                                 ii.    one (or both) of them suffers from a disability.

14.  Subsection 302-200.02(5) of the ITAR 2021 states that two persons do not have an interdependency relationship if one of them provides domestic support and personal care to the other:

a.    under an employment contract or a contract for services; or

b.    on behalf of another person or organisation such as government agency, a boy corporate or a benevolent or charitable organisation.

15.  All of the conditions in subsection 302-200(1) of the ITAA 1997, or alternatively, subsection 302-200(2) of the ITAA 1997, or one of the tests in section 302-200.02 of the ITAR 2021 must be satisfied for a person to be in an interdependency relationship with another person. We deal with each condition in turn, to establish if an interdependency relationship existed.

Close personal relationship

16.  The first requirement to be met is specified in paragraph 302-200(1)(a) of the ITAA 1997, which states that the two persons (whether or not related by family) must have a close personal relationship.

17.  This requirement is common to all of the tests specified in section 302-200 of the ITAA 1997 and section 302-200.02 of the ITAR 2021.

18.  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 states:

a.    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

b.    indicators of a close personal relationship may include:

                                              i.        the duration of the relationship

                                             ii.        the degree of mutual commitment to a shared life;

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

19.  The above indicators are not an exhaustive list and none of them are required for a close personal relationship to exist.

20.  People who share accommodation for convenience (such as flatmates) or people who provide care as part of an employment relationship or on behalf of a charity are not intended to fall within the definition of a close personal relationship.

21.  The Explanatory Statement to the Income Tax Amendment Regulations 2005 (No. 7) states that:

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

22.  While this statement does not preclude a child from being in an interdependency relationship with a parent, it suggests that interdependency only exists where the relationship goes beyond the usual relationship between an adult child and a parent.

23.  A close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not normally exist between a parent and an adult child because there would not be a mutual commitment to a shared life between the two. In addition, the relationship between parents and their adult children 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.

24.  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) of the ITAA 1997.

25.  The relationship between each of the Beneficiaries and the Deceased was not over and above a normal family relationship between a parent and an adult child.

26.  No evidence has been provided to suggest a mutual commitment to a shared life existed between the Beneficiaries and the Deceased.

27.  Although Beneficiary 1 had always lived with the Deceased, there is no evidence that they always intended to do so. Beneficiary 1 was only xx years of age at the time of the Deceased's initial diagnosis, and xx years of age at the time of the Deceased's passing. For the majority of this time, Beneficiary 1 was attending university. It is not considered unusual for a child of this age to remain at home, particularly if they are attending tertiary studies.

28.  It is not the case that Beneficiary 2 and Beneficiary 3 had always lived with the Deceased and always intended to do so.

29.  While Beneficiary 2 lived with the Deceased for a short period of time prior to the Deceased's passing, they had previously moved out of the family home to have an independent life, as would be expected of an adult child.

30.  Beneficiary 3 was living overseas and returned to Australia for a period of only xx months to assist in the care of the Deceased.

31.  It has not been demonstrated that there was a mutual commitment to a shared life, nor that the relationship between the Beneficiaries and the Deceased was over and above the usual relationship between an adult child and a parent.

32.  Therefore, a close personal relationship did not exist between the Beneficiaries and the Deceased and the first requirement as specified in paragraph 302-200(1)(a) of the ITAA 1997 has not been satisfied in this case.

Living together

33.  The second requirement to be met is specified in paragraph 302-200(1)(b) of the ITAA 1997 and states that two interdependent persons (whether or not related by family) live together.

34.  The term 'live' 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. In the context of paragraph 302-200(1)(b) of the ITAA 1997, the living arrangements must have some degree of permanency that is only disturbed by the death of one of the persons.

35.  You have advised that Beneficiaries 1 and 2 and the Deceased lived together, prior to the Deceased's death.

36.  You advised that Beneficiary 1 had lived with the Deceased since 20xx. Bank statements for the periods xx/xx 20xx to xx/xx 20xx, and xx/xx 20xx to xx/xx 20xx, have been provided that are addressed to Beneficiary 1 at the Residence.

37.  ATO records shows Beneficiary 1's address as the Residence from xx 20xx until xx 20xx.

38.  You advised that Beneficiary 2 resigned from their full-time employment and relocated to live with the Deceased in xx 20xx. ATO records show income statements for the 20xx-xx income year that confirm Beneficiary 2 ceased working with an employer based in xxxxx in xx 20xx and commenced with a new employer based in xxxxx in xx 20xx.

39.  Banks statements have been provided, for the period xx/xx 20xx to xx/xx 20xx, that are addressed to Beneficiary 2 at the Residence.

40.  ATO records show Beneficiary 2's address as the Residence from xx 20xx to xx 20xx.

41.  Copies of Beneficiary 1 and Beneficiary 2's driver's licenses have been provided, showing the address of both beneficiaries as the Residence.

42.  Beneficiary 3 lived overseas for several years prior to xx 20xx when they returned to Australia to assist in the care of the Deceased. Their stay was approximately xx months and they returned to their country of residence on xx 20xx.

43.  Subsection 302-200.02(4) of the ITAR 2021 provides relief in that two persons still have an interdependency relationship if:

•         they have a close personal relationship; and

•         one (or both) of them has a disability.

44.  From the facts presented, the Deceased's serious illness prevented them from living together until the death of the Deceased. Therefore, the fact that they did not live together until the Deceased's death would not prevent them from being in an interdependency relationship.

Financial support

45.  The third requirement to be met is specified in paragraph 302-200(1)(c) of the ITAA 1997, which states that one or each of these two persons provides the other with financial support.

46.  Financial support under paragraph 302-200(1)(c) of the ITAA 1997 is satisfied if some level of financial support (not necessarily substantial) is being provided by one person (or each of them) to the other.

47.  The Beneficiaries had sufficient income from employment to support themselves financially and were not financially dependent on the deceased.

48.  The Deceased was not financially dependent on the Beneficiaries as they had sufficient savings to support themselves.

49.  However, "financial support" does not equate with financial dependence. The level of financial support required does not have to be substantial.

50.  You advised that the Beneficiaries were provided with accommodation, utilities and food by the Deceased.

51.  Documentation, by way of several bank statements, has been provided to show the Deceased made frequent ongoing payments to Beneficiary 1 and Beneficiary 2 in the months prior to their death.

52.  Documentation, by way of bank statements, has been provided to show purchases made by Beneficiary 3 during their stay in Australia. Beneficiary 3 stated that these purchases included groceries for the family and petrol purchases for the Deceased's and other Beneficiaries' cars. The statements do not provide sufficient evidence to support that the expenses were paid for the Deceased.

53.  Therefore, there is sufficient evidence that the Deceased provided Beneficiary 1 and Beneficiary 2 with financial support during the final months of the Deceased's life. It has not been shown that Beneficiary 3 provided, or was provided with, financial support during the final months of the Deceased's life.

54.  Consequently, paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied for Beneficiary 1 and Beneficiary 2, but has not been satisfied for Beneficiary 3.

Domestic support and personal care

55.  The fourth requirement to be met is specified in paragraph 302-200(1)(d) of the ITAA 1997, which states that one or each of these two persons provides the other with domestic support and personal care. In discussing the meaning of domestic support and personal care, paragraph 2.16 of the SEM 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.

56.  From the facts presented and doctor's certificates provided, it is accepted that Beneficiary 1 and Beneficiary 2 provided the Deceased with significant assistance with domestic support and personal care.

57.  The domestic support and personal care provided by Beneficiary 1 and Beneficiary 2 is supported by:

•         A record of professional placement attendance for Beneficiary 1 showing absences due to family issues on two occasions.

•         A doctor's letter dated xx/xx 20xx that supported the significant care provided by Beneficiary 1.

•         A doctor's letter dated xx/xx 20xx that detailed the care and support provided by both Beneficiary 1 and Beneficiary 2 as follows:

a.    Attending regular appointments

b.    Household duties

c.     Personal hygiene; and

d.    Administration of medication

58.  Given the Deceased's medical condition and the fact Beneficiary 3 travelled from their country of residence to spend time with the Deceased, it can be inferred that some care was provided. However, no evidence has been provided to support the claim of domestic support and personal care provided by Beneficiary 3.

59.  Therefore, the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied for Beneficiary 1 and Beneficiary 2, but not for Beneficiary 3.

Conclusion

60.  As all of the requirements in section 302-200 of the ITAA 1997 have not been satisfied, the Deceased and the Beneficiaries were not in an interdependency relationship in the period just before the Deceased's death.

61.  As the Beneficiaries were not in an interdependency relationship with the Deceased, the Beneficiaries are not death benefits dependants as defined under section 302-195 of the ITAA 1997.