Private ruling: Interdependency
Date of advice: 27 June 2019
Published: September 2019
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Is a person (the Beneficiary) a death benefits dependant 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 Deceased passed away in early 2017 as a result of multiple complicated medical issues. Copies of medical documentation, for the period late 2014 to early 2015, have been provided that evidence the health issues of the Deceased. The Deceased was aged over XX years of age at the time of death. In mid-2017 the Deceased Estate received a death benefit from the deceased's self-managed super fund. Under the terms of the Will the Deceased adult children will each receive an equal 25 % share of the Estate. The ruling request is in relation to one of the adult children, the Beneficiary. You have stated that the Deceased had previously lived at the Residence. Their child and partner lived in the granny flat on the property. You have advised the period of time the Deceased and Beneficiary lived together was from late 2013 to late 2016 with short periods of respite as the Deceased became too frail to continue living at home. You have stated, the Beneficiary's home is situated at the Home. You have further stated the Beneficiary's spouse also lived at the Home. You have stated on occasion whilst living with the Beneficiary, the Deceased would travel to the Second' child's house to give the Beneficiary some respite. A number of medical reports dated mid-late 2014 were addressed to the deceased at the Residence. You stated that in late 2016 the Deceased moved into a local nursing home (Nursing Home). You have stated that during the three year period that the Deceased lived with Beneficiary, the two individuals had a close relationship being parent and child. You stated the Deceased was financially dependent but did provide significant financial contributions to the Beneficiary's household running expenses during the period. You stated the Beneficiary provided domestic support and personal care to the Deceased, including assisting with medications, doctor's visits, transport generally, cleaning, laundry, and shopping. A medical report dated early 2019 by a Medical Practitioner certified that in the last years of their life the Deceased was highly dependent on family members re care that they provided up to at least several times daily. They further certified that as being elderly and frail the Deceased was unable to live alone. You stated that when the Deceased moved into the Nursing Home, the Beneficiary visited them on a regular basis, and continued to provided support and personal care in the last two months. The Deceased passed away in the nursing home within two months of arrival The Beneficiary and the Deceased did not own any assets together. The Beneficiary did not receive Carer's Allowance in relation to the deceased. You stated the Deceased was provided ongoing domestic support and personal care by her children, including: · Preparation of breakfast · Showering & moisturising full body · Peg Tube maintenance · Dressing · Afternoon mail, business assistance, phone calls etc. · Meals · Pill distribution · Undressing and preparing for bed · Care associated with incontinence (including extra showering and dressing required) You state that in early 2017, the Deceased was admitted to the Village as one child was overseas for a month and the Beneficiary was in another state.

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)(a) | Income Tax Assessment Act 1997 Paragraph 302-195(1)(b) | Income Tax Assessment Act 1997 Paragraph 302-195(1)(c) | 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(2)(a) | Income Tax Assessment Act 1997 Paragraph 302-200(3)(a) | Income Tax Assessment Regulations 1997 Subregulation 302-200.01(2)

Reasons for decision: Summary: An interdependency relationship as defined under subsection 302-200 (1) of the ITAA 1997 did not exist between the Deceased and the Beneficiary just before the Deceased died. Therefore, in relation to the death benefit paid to the estate of the Deceased to which the Beneficiary is entitled to receive, the Beneficiary is not considered a death benefits dependant of the Deceased as defined in subsection 302-195(1) of the ITAA 1997. | 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 of the ITAA 1997. 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. | Detailed Reasoning - 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. 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 in accordance with paragraph 302-195(1)(c). | 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(2) of the ITAA 1997 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 Subsection 302-200(3) of the ITAA provides that the 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 all relevant circumstances of the relationship between the persons, including (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. All of the conditions already specified in subsection 302-200(1) of the ITAA 1997 or alternatively in subsection 302-200(2), must be satisfied for a person to be in an interdependency relationship. 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. The expression 'close personal relationship' is not defined in the ITAA 1997. However, the meaning of the term is discussed 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). According to the SEM: 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 (e.g. flatmates), 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. Furthermore, in the explanatory statement (ES) to the Income Tax Amendment Regulations 2005 (No. 7), it states that: Generally speaking, it is not expected that children will be in an interdependency relationship with their parents. While this statement in the ES does not absolutely preclude a child from being in an interdependency relationship with a parent it does suggest that it will only exist where there are aspects to the relationship that go beyond what would usually be observed in such a situation. Given that the Deceased was an adult parent at the time of death, the Deceased and the Beneficiary had of course known each other for some time. However, the 'duration of a relationship' in and of itself is not sufficient to categorize a relationship as 'close and personal.' The other considerations must also be taken into account. Of particular importance in this case are the related matters outlined in paragraphs (iv), (viii) and (ix) of subregulation 302-200.01(2) of the ITAR 1997. The facts in this case indicate that the relationship between the Deceased and the Beneficiary was a normal familial relationship. Specifically, the facts provided in this case do not indicate that there would be a mutual commitment to a shared life between the Deceased and the Beneficiary. Even though you contend that the Beneficiary was living with the Deceased for a period of time, the Deceased maintained her own home and spent time with her other children and in nursing homes. The degree of support outlined in your contentions must be considered in accordance with paragraph (vii) of subregulation 302-200.01(2) of the ITAR 1997. While it is acknowledged that the degree of emotional support provided by the Beneficiary to the Deceased is significant, it does not go beyond the level of emotional support that would typically be expected in a relationship between a parent and child. As such, a consideration of paragraph (vii) of subregulation 302-200.01(2) of the ITAR 1997 does not sufficiently differentiate the situation in this case from others involving a parent and child In view of the above it is considered that a close familial relationship existed between the Beneficiary and the Deceased, but, it was not a close personal relationship as envisaged by paragraph 302-200(1)(a) of the ITAA 1997. Accordingly, paragraph 302-200 (1)(a) of the ITAA 1997 has not been satisfied . | 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'. In this instance, you contend the Deceased and the Beneficiary shared a home together in order to provide ongoing care and support, both emotionally and financially, for the Deceased. Whilst you contend that the Deceased did spend time living with the Beneficiary there is no evidence to support this. The evidence provided reflects that the Deceased resided at either the Residence or Another Residence. There was no evidence provided to show the Deceased spent any time residing at the Home. In addition you have stated that the Beneficiary and the Deceased did not own any assets together and the Deceased retained ownership of their home. No evidence has been provided that the Beneficiary and the Deceased had committed to a shared life together and intended the relationship to be permanent. Therefore, it is considered that the Beneficiary and the Deceased did not live together for the purpose of satisfying paragraph 302-200(1) (b) of the ITAA 1997. | Detailed Reasoning - 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, for example providing support for a person's household and/or medical expenses. In this case, you have contended that the Deceased was financially dependent but did provide significant financial contributions to the Beneficiary's household running expenses. No evidence has been provided to demonstrate either that the Deceased was financially dependent on the Beneficiary or that the Deceased contributed to the Beneficiary's household expenses. Therefore the requirement specified in paragraph 302-200(1)(c) of the ITAA 1997 has not been met. | Detailed Reasoning - 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 activities. Personal care service may consist of assistance with mobility, personal hygiene and generally ensuring the physical and emotional comfort of a person. You have contended that the Beneficiary provided the Deceased with domestic support and personal care on an ongoing basis. The Beneficiary assisted the Deceased with the basic necessities following the Deceased's failing health as showering, toileting, laundry, providing meals, overseeing the dispensation of and administering medications as well as driving the Deceased to and from medical appointments and treatments as well as anywhere else the Deceased needed to go. The Medical Practitioners report that you have provided, dated early 2019 certified that in the last years of their life the Deceased was highly dependent on family members re care that they provided up to at least several times daily. The Medical Practitioner further certified that as being elderly and frail they were unable to live alone. There was no specific mention that it was the Beneficiary solely providing the care. There is no evidence provided the Beneficiary was the primary carer or that the Deceased resided with the Beneficiary and you have further confirmed that the Beneficiary did not receive a carer's allowance. It is therefore considered that the requirement in paragraph 302-200(1) (d) of the ITAA 1997 has not been satisfied in this instance. As all of the conditions already specified in subsection 302-200(1) of the ITAA 1997 have not been met consideration needs to be given to subsection 302-200(2), To meet the conditions of this section paragraphs (a) to (f) have to be met .As set out in paragraphs 15 - 18 is considered that a close familial relationship existed between the Beneficiary and the Deceased, but, it was not a close personal relationship as envisaged by paragraph 302-200(2)(a) of the ITAA 1997.Therefore as paragraph 302-200(2)(a) has not been met subsection 302-200(2) has not been satisfied. | Detailed Reasoning - Conclusion: The Beneficiary and Dependant are not considered to be in an interdependency relationship as all of the conditions already specified in subsections 302-200(1) and (2) of the ITAA 1997 have not been met. Therefore the Beneficiary is not a death benefits dependent of the Deceased for the purposes of section 302-195 of the ITAA 1997.