Private ruling: Death benefit payment
Date of advice: 4 May 2016
Published: June 2016
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is your client a death benefits dependant of the deceased as defined under section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: Your client is an adult child of the Deceased. Several years ago the Deceased was diagnosed with a terminal illness (the illness). Following the diagnosis, the Deceased was unable to work and commenced to receive a disability pension. The Deceased did not hold private health insurance, nor was the Deceased in receipt of income protection insurance. Immediately following the Deceased's diagnosis, your client moved to the Deceased's residence in a remote location to care for the Deceased. Your client's parents lived at separate residences and towns and had not lived together for more than 10 years. Your client and a sibling lived with their non-Deceased parent during their formative years and their and your client continued to reside there until the Deceased's diagnosis. While your client resided with the non-Deceased parent, that parent provided your client with accommodation, food, and limited financial support. During this time that parent received child support from the Deceased in respect of your client. After ceasing school your client was unsuccessful in obtaining employment and received government assistance. Your client was the full-time personal carer for the Deceased during the period of illness. The Deceased was unable to drive following the diagnosis and purchased your client car which was used to regularly transport the Deceased to another city for medical treatment. In 20XX, the Deceased had a number of operations. Following the surgeries the Deceased required hospital treatment which involved regular trips to another city. As the Deceased became increasingly incapacitated, your client became responsible for the Deceased's daily needs which included: • cooking, cleaning, washing and other household chores; • shopping for groceries; • dressing and personal hygiene; • administration of medicine; • purchase of consumables; • payment of the Deceased's accounts; • making medical appointments; • transporting the Deceased to see friends; and • transporting the Deceased to and from medical and legal appointments. Your client received assistance from a nurse with changing medical dressings for the Deceased. For most of the time your client was the only person to give the Deceased support at all hours. The Deceased was dependent on your client for emotional support on a daily basis. Your client received Centrelink Carer's Payment for the period your client provided care for the Deceased. During the period where your client cared for the Deceased, your client received no other financial support and was financially dependent on the Deceased for providing accommodation and car expenses. The Deceased paid the household bills but was sometimes assisted by your client's non-Deceased parent. During the relevant income year the Deceased passed away from the illness. A PAYG payment summary - superannuation lump sum shows a lump sum payment was made from a superannuation scheme to your client.

Relevant legislative provisions: Income Tax Assessment Act 1936 former section 27AAB. | Income Tax Assessment Act 1997 section 302-195. | Income Tax Assessment Act 1997 section 302-200. | Income Tax Assessment Regulations 1997 subregulation 302-200.01

Reasons for decision: Summary: Your client is considered to be a death benefits dependant of the Deceased as they were in an interdependency relationship at the time of the Deceased's death. | Detailed Reasoning - Death benefits dependant: Division 302 of the ITAA 1997 sets out the taxation arrangements that apply to the payment of superannuation death benefits. 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.(emphasis added) As neither paragraphs (a), (b) or (d) of the above definition apply to your client, paragraph 302-195(c) of the ITAA 1997 is to be considered to determine whether your client was in an interdependency relationship with the Deceased just before the Deceased died. | Detailed Reasoning - Interdependency relationship: Section 302-200 of the ITAA 1997 provides 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. Under subsection 302-200(2) of the ITAA 1997 two people who have a close personal relationship but cannot satisfy all of the other requirements of an interdependency relationship because of a physical, intellectual or psychiatric disability, may still have an interdependency relationship. In accordance with subsection 302-200(3) of the ITAA 1997, 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. Subregulation 302-200.01 of the Income Tax Assessment Regulations 1997 (ITAR 1997) states that the matters to be taken into account for the purposes of paragraph 302-200(3)(a) of the ITAA 1997 are all the relevant 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 | Detailed Reasoning - Close personal relationship:: Paragraph 302-200(1)(a) and 302-200(2)(a) of the ITAA 1997 states that the two persons (whether or not related by family) must have a close personal relationship. 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 parents and their children 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 their children may be treated as an interdependency relationship for the purposes of subsection 302-200(1) of the ITAA 1997. The facts show that your client was a child of the Deceased and that a close familial relationship existed between them prior to, and at the time of, the Deceased's death. Further the facts also show that their relationship was over and above that of a normal family relationship when taking into account: (a) your client and the Deceased lived together from the time the Deceased was diagnosed with an illness until the Deceased's death; (b) the care provided by your client to the Deceased, which was on a daily basis, was extensive as: (i) the Deceased's illness, which was terminal, required your client to transport the Deceased from their remotely located residence to major regional centres for medical treatment; and (ii) your client's role as the Deceased's full-time carer is evidenced by your client's receiving a Centrelink Carer's Payment; (c) the Deceased was dependent on your client for emotional support on a daily basis. Accordingly, it is considered that a close personal relationship existed between your client and the Deceased as required by paragraph 302-200(1)(a) of the ITAA 1997. | Detailed Reasoning - Living together:: Paragraph 302-200(1)(b) of the ITAA 1997 states that the two persons must live together. At the time of the Deceased's death, your client and the Deceased lived together and had been living together for over a year. Consequently, paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied. | 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 is being provided by one person (or each of them) to the other. Your client and the Deceased provided financial support to one another as the Deceased paid for your client's living expenses which included accommodation, household bills, and car expenses. Consequently, paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied. | Detailed Reasoning - Domestic support and personal care:: The Supplementary Explanatory Memorandum to the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004 which inserted former section 27AAB of the ITAA 1936 (the immediate predecessor to section 302-200 of the ITAA 1997) discusses the meaning of domestic support and personal care and states: 2.16 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 services may commonly consist of assistance with mobility, personal hygiene and generally ensuring the physical and emotional comfort of a person. Your client provided the Deceased with domestic support such as grocery shopping, taking the Deceased to medical and legal appointments, and doing house chores. Further, your client also provided personal care to the Deceased by assisting the Deceased with basic personal hygiene and they provided emotional support to one another as the Deceased suffered from the terminal illness. In view of the above it is considered that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been met. | Detailed Reasoning - Conclusion: On the facts provided, it is considered that all the requirements in subsection 302-200(1) of the ITAA 1997 have been satisfied. Accordingly, your client and the Deceased were in an interdependency relationship prior to, and up to, the time of their death. As your client was in an interdependency relationship with the Deceased it follows that they are a death benefits dependant of the Deceased within the definition in section 302-195 of the ITAA 1997.