Private ruling: Superannuation death benefit - interdependency
Date of advice: 10 August 2021
Published: October 2021
Ruling period: Income year ending 30 June 2022
Date scheme commenced: 1 July 2021

Ruling: Q1: Was the beneficiary a death benefits dependant of the deceased person 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? | A1: Yes | Q2: Will the superannuation lump sum death benefits received by the Beneficiary in the 2021-22 income year be excluded from assessable income under section 302-60 of the ITAA 1997? | A2: Yes

Relevant facts and circumstances: 1. The Beneficiary is the partner but not a spouse of the Deceased. 2. You applied for a private ruling. 3. You provided the information in the facts listed below. 4. The Beneficiary and the Deceased started dating and started living together on a domestic basis. 5. The mortgage account on the property, despite being hold solely in the name of the Beneficiary, was treated as a joint account to cover the costs of household expenses. 6. The Beneficiary and Deceased provided financial support to each other. 7. The Beneficiary cared for the Deceased from by providing: • financial support, including paying for their bills, food, mortgage, motor vehicle expenses • domestic support, including attending to household cleaning, preparing meals, washing clothes, and other general household chores. 8. The Deceased also cared for the Beneficiary by providing: • financial support, including paying for their bills, food, mortgage, motor vehicle expenses • domestic support, including attending to household cleaning, preparing meals, washing clothes, and other general household chores. 9. The letters of administration of the Deceased estate were granted to the parents of the Deceased. 10. The parents of the Deceased have provided a statutory declaration in support of the application made by the Beneficiary to be the de facto partner of the Deceased. The statutory declaration states: • the Beneficiary and the Deceased were in a close personal relationship and were discussing the possibility of marriage and starting a family together. • the Deceased was working for two weeks at a time then lived two weeks at the property. • the Deceased was financially contributing to the payment of the mortgage and household expenses at the property. • they considered the Beneficiary and the Deceased to be living together on a genuine domestic basis. • they support the Beneficiary's claim that they were in an interdependency relationship with the Deceased. 11. The Beneficiary considered the property to be both theirs and the Deceased despite the fact the property was purchased by the Beneficiary prior to beginning their relationship with the Deceased. 12. The Deceased's estate consisted of several bank accounts, outstanding leave entitlements, a motor vehicle and superannuation. 13. Payment of the superannuation lump sum was paid into the deceased's estate and is current being held in the trust account of the solicitor.

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 (ITAR 2021) 302-200.01 | Income Tax Assessment (1997 Act) Regulations 2021 (ITAR 2021) 302-200.02

Reasons for decision: Summary: 14. An interdependency relationship as defined under section 302-200 of the ITAA 1997 existed between the Deceased and the Beneficiary, as all of the requirements set out in the legislation have been satisfied in this case. 15. Therefore, the Beneficiary is a death benefits dependant of the Deceased as defined in section 302-195 of the ITAA 1997. 16. Consequently, the taxable component of the superannuation lump sum death benefit paid to the Beneficiary is not assessable income or exempt income, as per section 302-60 of the ITAA 1997. | Detailed Reasoning - Meaning of death benefits dependant: 17. Division 302 of the ITAA 1997 sets out the taxation arrangements that apply to the payment of superannuation death benefits. These arrangements depend on whether the person that receives the superannuation death benefit is a dependant of the deceased and whether the amount is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit. 18. A superannuation death benefit is defined in section 307-5 of the ITAA 1997 as: A payment to you from a superannuation fund, after another person's death, because the other person was a fund member. 19. A superannuation lump sum is described in section 307-65 of the ITAA 1997 as a superannuation benefit that is not a superannuation income stream, as defined in section 307-70 of the ITAA 1997. 20. The taxable component of a superannuation death benefit paid as a lump sum to a non-dependant beneficiary is assessable income and is taxed under section 302-145 of the ITAA 1997. 21. Where a person who was a dependant of the deceased receives a superannuation death benefit paid as a lump sum, the death benefit is not assessable income and is not exempt income, under section 302-60 of the ITAA 1997. 22. 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 dependant of the deceased person just before he or she died. 23. As the Beneficiary is the partner but not a spouse of the Deceased, paragraphs 302-195(1)(a) and (b) are not applicable. 24. 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(d) of the ITAA 1997. However, it is generally accepted that this paragraph refers to financial dependence. 25. The Beneficiary was not financially dependent on the Deceased person and therefore, paragraph 302-195(d) is not applicable. 26. To meet the definition of a death benefits dependant, the Beneficiary must have been in an interdependency relationship with the Deceased, in accordance with paragraph 302-195(1)(c) of the ITAA 1997. | Detailed Reasoning - Interdependency relationship: 27. 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: • they have a close personal relationship; and • they live together; and • one or each of them provides the other with financial support; and • one or each of them provides the other with domestic support and personal care. 28. 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: • they have a close personal relationship; and • they do not satisfy one or more of the requirements of an interdependency relationship mentioned in paragraphs (1)(b), (c) and (d); and • the reason they do not satisfy those requirements is that either or both of them suffer from a physical, intellectual or psychiatric disability. 29. 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. 30. Subregulation 302-200.01(2) of the Income Tax Assessment (1997 Act) Regulations 2021 (ITAR 2021) states the matters to be taken into account as follows: • all of the circumstances of the relationship between the persons, including (where relevant): o the duration of the relationship o whether or not a sexual relationship exists o the ownership, use and acquisition of property o the degree of mutual commitment to a shared life o the reputation and public aspects of the relationship o the degree of emotional support o the extent to which the relationship is one of mere convenience o any evidence that the parties intend the relationship to be permanent; and o the existence of a statutory declaration signed by one of the persons to the effect that the person is, or (in the case of a statutory declaration made after the end of the relationship) was in an interdependency relationship with the other person. 31. 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. 32. Regulation 302-200.02 of the ITAR 2021 sets out the circumstances in which two people have an interdependency relationship. 33. Subregulation 302-200.02(2) of the ITAR 2021 provides that an interdependency relationship exists between two people where: • 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 by a mere friend or flatmate, for example one person provides significant care for the other person when they are unwell or suffering emotionally. 34. Subregulations 302-200.02(3) and (4) of the ITAR 2021 provide that an interdependency relationship also exists between two people where: • they have a close personal relationship; and • they do not satisfy the other requirements set out in subsection 302-200(1) of the ITAA 1997 because: o they are temporarily living apart, for example because one of them is temporarily working overseas or in gaol; or o one (or both) of them suffers from a disability. 35. Subregulation 203-200.02(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: • under an employment contract or a contract for services; or • on behalf of another person or organisation such as a government agency, a body corporate or a benevolent or charitable organisation. 36. 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 regulation 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. | Detailed Reasoning - Close personal relationship: 37. 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. 38. 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 2021. 39. 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 close personal relationship will be 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 • 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) 40. The above indicators are not an exclusive list and none of them are required for a close personal relationship to exist. 41. 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. 42. The matters that indicate the Beneficiary and the Deceased had a close personal relationship before the Deceased's death are: • The Beneficiary provided significant care and support to the Deceased throughout their life. They provided each other with intensive and ongoing emotional, domestic and financial support. This level of care exceeded the care and comfort that would usually be provided by friends or flatmates. They had an exceptionally close relationship. Further details of their care arrangements are provided below, under Domestic Support and Care. • The Beneficiary and the Deceased have lived together. The Deceased continued to be significantly dependent on the Beneficiary for ongoing care and support, for the remainder of the Deceased's life. They would have continued to live together if the Deceased were still alive. They had a strong mutual commitment to having a shared life. 43. Therefore, a close personal relationship existed between the Beneficiary and the Deceased and the first requirement specified in paragraph 302-200(1)(a) of the ITAA 1997 has been satisfied in this case. | Detailed Reasoning - Living together: 44. 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. 45. 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), the living arrangements must have some degree of permanency that is only disturbed by the death of one of the persons. 46. Prior to the Deceased's death, the Beneficiary and the Deceased lived together at the property. The property is owned by the Beneficiary. 47. the Deceased began contributing towards the payment of the mortgage of the property, together with household expenses. 48. Consequently, the requirement specified in paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied in this case. | Detailed Reasoning - Financial support: 49. 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. 50. 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. 51. From the facts presented, the Beneficiary and the Deceased had sufficient income from employment to support themselves financially and were financially dependent on each other for their bills, food, clothing, mortgage, loan repayments, utilities, motor vehicle expenses and provide them with accommodation, meals and cash for living expenses. 52. Therefore, the Beneficiary and the Deceased provided each other with financial support during the final years of the Deceased's life. 53. Consequently, paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied. | Detailed Reasoning - Domestic support and personal care: 54. 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. 55. From the facts presented, the Beneficiary and the Deceased provided each other with significant assistance, including domestic household chores. The Beneficiary and the Deceased also had a pet together which would have required additional care and support. 56. In addition, the Beneficiary and the Deceased provided each other with significant emotional support and comfort. 57. Therefore, the requirement in paragraph 302-200(1)(d) has been satisfied. | Detailed Reasoning - Support and care provided in a close personal relationship: 58. Subregulation 302-200.02(2) of the ITAR 2021 provides that two people will still be in 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 the parties provides the other with support and care of a type and quality normally provided in a close personal relationship, beyond what would normally be provided by a mere friend or flatmate. 59. From the facts presented, the Beneficiary and Deceased provided each other with care and support beyond what would normally be provided by a mere friend or flatmate. The Beneficiary and the Deceased provided significant care for each other when they were unwell or suffering emotionally. | Detailed Reasoning - Conclusion: 60. As all of the requirements in section 302-200 of the ITAA 1997 and Subregulation 302-200.02(2) of the ITAR 1997 have been satisfied, the Deceased and Beneficiary were in an interdependency relationship in the period just before the Deceased's death. 61. As the Beneficiary was in an interdependency relationship with the Deceased, the Beneficiary is a death benefits dependant as defined under section 302-195 of the ITAA 1997.