Private ruling: Taxation of superannuation death benefits
Date of advice: 19 October 2018
Published: December 2018
Ruling period: Income year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is a person (the Beneficiary) a death benefits dependant of a person who has died (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? | A1: Yes

Relevant facts and circumstances: The Beneficiary is a child of the Deceased who is aged over 18 years. The Beneficiary lived with the Deceased since their birth, they never married, never had a romantic relationship and have no children. The Beneficiary suffers from a mental disability and has not worked in paid employment for more than 20 years. They receive a Disability Pension. The Beneficiary has never held a driver’s licence and rarely leaves home alone. They have essentially lived in the personal care of their parents (until their other parent died) and then the Deceased until the Deceased’s death. Currently, the Beneficiary lives with an older sibling. Several years ago, the Deceased, the Beneficiary and the Beneficiary’s sibling purchased the residence they occupied for more than XX years as joint tenants. The Deceased provided financial support, domestic support and personal care to the Beneficiary in the following form: n accompanied the Beneficiary to, and attended with them, medical and other appointments; n accompanied the Beneficiary to their volunteer activities and ‘worked’ alongside them to assist them and help them build personal confidence; n made regularly shopping trips with the Beneficiary, organised their grocery and general shopping; n contributed towards the Beneficiary’s household cost such as food, utilities, council rates, water rates, telephone bills and gardening maintenance; and n provided the Beneficiary with equity in the family home thus saving the Beneficiary the cost of paying rent. Several years before their death, the Deceased developed an illness. Due to their subsequent medical decline , they needed help with certain physical tasks and required ongoing care and support. The Beneficiary provided the Deceased with ongoing care and support in the following form: n attended medical, optical, dental and other appointments with the Deceased; n assisted the Deceased with showering and personal grooming; and n undertook routine domestic tasks such as cooking, cleaning and gardening.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 302-195. | Income Tax Assessment Act 1997 Section 302-200. | Income Tax Assessment Regulations 1997 Regulation 302-200.01.

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 - 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. *To find definitions of asterisked terms, see the Dictionary, starting at 995-1. As the Beneficiary is a child of the Deceased aged over 18, 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. | Detailed Reasoning - 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): n the duration of the relationship; and n the ownership use and acquisition of property; and n the degree of mutual commitment to a shared life; and n the degree of emotional support; and n the extent to which the relationship is one of mere convenience; and n any evidence suggesting that the parties intend the relationship to be permanent. | Detailed Reasoning - 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. Generally, a close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not exist between a parent and child. This is because the relationship between a parent and 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) of the ITAA 1997. In 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 between them as required by paragraph 302-200(1)(a) of the ITAA 1997. The matters that indicate that the Beneficiary and the Deceased had a close personal relationship prior to the Deceased’s death are: n the Beneficiary had lived with the Deceased all their life; they never moved out of the family home, never married and had no children; n the Deceased provided the Beneficiary with emotional support when attending medical and other appointments; n the Deceased provided emotional support and assistance to the Beneficiary to enable them to engage in activities outside their home and build their self-confidence; n the Beneficiary provided domestic support and personal care to the Deceased when they became unwell; n the facts indicate that the relationship between the Deceased and the Beneficiary was intended to be permanent; and n there is nothing to indicate that the relationship was one of mere convenience. | Detailed Reasoning - 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’. Where, as here, an adult child has lived with a parent all their life; and they have purchased the home they live in as joint tenants, it is considered that the child has, in fact, committed to a shared life with the parent and they intended the relationship to be permanent. Therefore, it is considered that the Beneficiary and the Deceased lived together. | Detailed Reasoning - 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 utility bills, council rates, water rates and other household and grocery bills. | Detailed Reasoning - Domestic support and personal care: Domestic support and person 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 and the Deceased provided one another with domestic support and personal care on an ongoing basis. The Beneficiary assisted the Deceased with basic necessities such as showering and undertaking domestic tasks that the Deceased’s illnesses preventing them from doing as well as preparing meals. 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.