Private ruling: Superannuation death benefit - interdependency
Date of advice: 18 November 2024
Published: 13 January 2025
Ruling period: 30 June 2023
Date scheme commenced: 1 July 2023

Ruling: Q1: Was the Beneficiary 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? | A1: No.

Relevant facts and circumstances: 1. The Beneficiary is the adult child of the deceased person. 2. The Deceased died in the 20XX income year. 3. The Beneficiary was born in 19XX and was therefore older than 18 years when the Deceased died. 4. The Beneficiary received a death benefit payment from the Deceased's superannuation fund. The superannuation fund withheld tax from the death benefit payment. 5. You applied for a private ruling. 6. You provided the following documents in support of your application: a. The death certificate for the Deceased b. PAYG Payment Summary - superannuation lump sum - for the year ending 30 June 2023, with the following details: i. Payer - xxxx ii. Payee - xxxx iii. Date of payment - xx/xx 2023 iv. Taxed element - $xxxx v. Tax-free component - $xxxx vi. Total tax withheld - $xxxx c. A medical certificate dated xx/xx 2023 from the Deceased's doctor confirming the Deceased was receiving medical treatment for a terminal condition and, at the time of their passing, was in the fulltime care of the Beneficiary. d. A list of payments the Beneficiary advises XXX received from the Deceased. e. Bank statements for the Beneficiary from xx/xx/xxxx to xx/xx/xxxx. Statements between xx/xx/xxxx and xx/xx/xxxx show regular payments marked "carers payments" from xxxx and xxxx on behalf of the Deceased. f. An affidavit from the executor of the Deceased's estate, that stated: i. The Beneficiary and the Deceased had a close relationship ii. The Beneficiary ended their employment to care for the Deceased iii. The Beneficiary prepared meals, shopped, performed household duties, and bathed the Deceased. iv. The Deceased and their spouse arranged with the Beneficiary to end their employment and instead be paid by them to provide care to the Deceased. g. An email dated xx/xx/xxxx between the Executor and the Deceased's accountant confirming payments had been made to the Beneficiary by the Deceased. h. An ASIC extract for xxxx xxxx PTY LTD. i. An ariel photograph of the Deceased's property showing House A and House B. j. A record certificate of title for the Deceased's property. k. A copy of the Beneficiary's driver's license. l. Several unsigned statements from the Beneficiary that stated: i. The Beneficiary, their spouse and child, lived with the Deceased in House A, from 20xx and 20xx due to financial difficulties. ii. In 20xx, the Deceased and their partner requested the Beneficiary, their spouse, and children to move into House A at the Deceased's property. The Deceased moved into a newly built house, House B, at the same property. This request was made so that the Beneficiary could help maintain the property of the Deceased and their spouse. iii. In 20xx the Beneficiary separated from their spouse, and the spouse vacated House A at the Deceased's property. The Beneficiary remained in House A with their children. iv. In xxxx 20xx the Deceased was diagnosed with a terminal illness. v. In xxxx 20xx, the Beneficiary resigned from their position with xxxx to provide care and support for the Deceased. vi. In xxxx 20xx the Deceased had to move out of House B due to ongoing relationship issues between the Deceased and their spouse. vii. The Deceased moved into House A with the Beneficiary in xxxx 20xx and remained living with the Beneficiary until the Deceased's death. viii. The Beneficiary provided care and support for the Deceased including providing overnight care, paying for a meal subscription and preparing meals, administering medication and attending medical appointments. ix. The Deceased paid for the Beneficiary's lawyer fees during their divorce. x. The Deceased provided childcare for the Beneficiary's children. 7. The Beneficiary was not financially dependent on the Deceased as the Beneficiary received sufficient financial support and income from: a. employment, providing income of $xxxx for the 20xx-20xx income year. 8. The Deceased was not financially dependent on the Beneficiary as the Deceased person received sufficient income from: a. investments including trust distributions, providing income of $xxxx for the 20xx-xx income year 9. The Beneficiary cared for the Deceased from around xxxx 20xx to xx xxxx 20xx by providing: a. financial support, including paying for meals via a meal subscription service. b. domestic support, including attending to household cleaning, laundry, gardening and preparing meals. c. personal care and assistance, including, attending medical appointments, administering medication, and helping with personal care and toileting. d. emotional support, including providing comfort, emotional support and palliative care.

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 - Meaning of death benefits dependant: 10. 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. 11. A superannuation death benefit is defined in section 307-5 of the ITAA 1997 as: a. A payment to you from a superannuation fund, after another person's death, because the other person was a fund member. 12. 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. 13. 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. 14. 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. 15. 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. 16. As the Beneficiary is the adult child of the Deceased, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 are not applicable. 17. 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. 18. The Beneficiary was not financially dependent on the Deceased person and therefore, paragraph 302-195(1)(d) of the ITAA 1997 is not applicable. 19. 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: 20. 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. 21. 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. 22. 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. 23. 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 shared life d. the reputation and public aspects of the relationship e. the degree of emotional support f. the extent to which the relationship is one of mere convenience g. any evidence that the parties intend the relationship to be permanent; and h. 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. 24. 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. 25. Section 302-200.02 of the ITAR 2021 sets out the circumstances in which two people have an interdependency relationship. 26. 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 paragraphs 302-200(1)(a) to (c) of the ITAA 1997; and b. one or both 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. 27. 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 other requirements set out in subsection 302-200(1) of the ITAA 1997 because: i. they are temporarily living apart, for example because one of them is temporarily working overseas or in gaol; or ii. one (or both) of them suffers from a disability. 28. 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 a government agency, a body corporate or a benevolent or charitable organisation. 29. 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. | Detailed Reasoning - Close personal relationship: 30. 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. 31. 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. 32. 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). 33. The above indicators are not an exclusive list and none of them are required for a close personal relationship to exist. 34. 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. 35. The Explanatory Statement to the Income Tax Amendment Regulations 2005 (No. 7) stated that: a. Generally speaking, it is not expected that children will be in an interdependency relationship with their parents. 36. 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. 37. 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. 38. 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. 39. The relationship between the Beneficiary and the Deceased was not over and above a normal family relationship between a parent and an adult child. 40. No evidence has been provided to suggest a mutual commitment to a shared life existed between the Beneficiary and the Deceased. 41. Although the Beneficiary and the Deceased lived together at the time of the Deceased's death, this was due to the relationship issues being experienced by the Deceased and not due to an ongoing commitment to a shared life. 42. Prior to the Deceased moving into House A, the Beneficiary and the Deceased lived in separate houses on the same property. The Deceased lived with their spouse and the Beneficiary lived with their children. 43. Had the Deceased not experienced these relationship issues, the Deceased and the Beneficiary would have continued to live in separate houses with their spouse and children, respectively. 44. Therefore, a close personal relationship did not exist between the Beneficiary and the Deceased and the first requirement specified in paragraph 302-200(1)(a) of the ITAA 1997 has not been satisfied in this case. | Detailed Reasoning - Living together: 45. 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. 46. 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. 47. You advised that prior to the Deceased's death, the Beneficiary and the Deceased lived together. 48. You advised that the Deceased moved into the Beneficiary's home in xxxx 20xx due to ongoing relationship issues between the Deceased and their spouse. 49. You provided a copy of the Beneficiary's driver's license showing their address as xxxx. 50. ATO records show the Deceased's address as xxxx. 51. Consequently, the requirement specified in paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied in this case. | Detailed Reasoning - Financial support: 52. 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. 53. 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. 54. The beneficiary had sufficient income to support themselves. 55. The Deceased had sufficient income to support themselves. 56. However, "financial support" does not equate with financial dependence. The level of financial support required does not have to be substantial. 57. Bank statements show that the Deceased provided financial support to the Beneficiary by making regular "carers payments" between xx xxxx 20xx and xx xxxx 20xx. 58. The Deceased's accountant confirmed payments were made by the Deceased to the Beneficiary in an email to the Executor dated xx xxxx 20xx. 59. Therefore, the Deceased provided the Beneficiary with financial support during the final months of the Deceased's life. 60. Consequently, paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied. | Detailed Reasoning - Domestic support and personal care: 61. 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: a. 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. 62. From the facts presented, the Beneficiary provided the Deceased with significant assistance with domestic support and personal care, including preparing meals, cleaning, administering medication, showering, toileting and dressing, transportation and attending medical appointments. 63. A medical certificate from the Deceased's doctor, dated xx xxxx 20xx advises that the Beneficiary was the Deceased's fulltime carer during their illness. 64. In addition, the Beneficiary provided the Deceased with significant emotional support and comfort. 65. Therefore, the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied. | Detailed Reasoning - Conclusion: 66. As all of the requirements in section 302-200 of the ITAA 1997 have not been satisfied, the Deceased and Beneficiary were not in an interdependency relationship in the period just before the Deceased's death. 67. As the Beneficiary was not in an interdependency relationship with the Deceased, the Beneficiary is not a death benefits dependant as defined under section 302-195 of the ITAA 1997.