Private ruling: Superannuation death benefit and dependants
Published: August 2011
Ruling period: The 2005-06 income year | The 2006-07 income year | The 2007-08 income year | The 2008-09 income year | The 2009-10 income year
Date scheme commenced: 1 July 2005

Ruling: Q1: Did an interdependency relationship exist between you and your sibling in accordance with section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No | Q2: Is your part of the superannuation death benefit tax free under section 302-60 of the ITAA 1997? | A2: No

Relevant facts and circumstances: Your late sibling has lived with you for the last few years. Your sibling was younger than you. All of your sibling's personal mail was directed to your address. Your sibling kept their car, motorbike and bicycle at your home. Your sibling purchased assets. Your sibling paid an amount weekly for household expenses such as groceries, electricity, rates, telephone bills, laundry and gardening expenses, car and house insurance. They sometimes paid for some of your travel expenses. You state that this financial support was necessary as due to salary sacrifice and a reduced take home pay, it was needed for you to maintain a normal living standard during the time they lived with you. Your sibling assisted you with cooking, laundry and other household chores. They drove you to your medical operation and cooked and cared for you during your recuperation. You did the same when they had their medical operation. Your sibling drove you to your medical appointments and you accompanied them to their medical appointments for moral support. Your sibling used to mow the lawn and vacuum the house until medical reasons prevented them, after which you relied on a gardener and a cleaner. When repairs were required at home, they would undertake the repairs themself or hire a tradesman to do the job. Your sibling drove you to the shops, markets, religious institution and library on a regular basis. You dined out together with relatives and friends. You went for drives to various locations. You sometimes stayed at resorts. You drove as far as other capital cities. You often travelled overseas together. All your trips were planned by your sibling. When your sibling passed away, you cancelled all your prebooked and prepaid travel plans. You and your sibling have been very close and you depended on them to take care of you during your travels. Your sibling passed away recently. The payment is a superannuation death benefit paid to The Estate of the Late. They did not leave a will. The Supreme Court issued Letters of Administration to you and another person. There are multiple beneficiaries of your sibling's estate. The administrators of the estate will distribute your share of the benefit after the expenses and tax liabilities of the estate have been settled. Your sibling had no dependants and no one else can claim a dependant or interdependent relationship with them.

Relevant legislative provisions: Subsection 101A(3) of the Income Tax Assessment Act 1936 | Subdivision 302-C of the Income Tax Assessment Act 1997 Section 302-10 of the Income Tax Assessment Act 1997 | Section 302-60 of the Income Tax Assessment Act 1997 | Subsection 302-195(1) of the Income Tax Assessment Act 1997 | Section 302-200 of the Income Tax Assessment Act 1997 | Subsection 302-200(1) of the Income Tax Assessment Act 1997

Reasons for decision: Summary: You have not satisfied all the conditions in subsection 302-200(1) of the ITAA1997. You and your sibling were not in an interdependency relationship. You are therefore not a death benefits dependant. | Detailed Reasoning - Detailed reasoning: A superannuation death benefit may be paid to a dependant, a non-dependant or a legal personal representative of a deceased fund member. The tax treatment of the payment depends on whether the recipient was a death benefits dependant of the deceased and the total amount of the payments received by the person in consequence of the same termination. The meaning of death benefits dependant is discussed in subsection 302-195(1). A death benefits dependant of a person who has died is: · the deceased person's spouse or former spouse · the deceased person's child aged less than 18 · any other person with whom the deceased person had an interdependency relationship under section 302-200 of the ITAA 1997 just before they died (applies from 1 July 2005); or · any other person who was a dependant of the deceased person just before they died. Broadly, there are two tests to establish an interdependency relationship under section 302-200 of the ITAA 1997. They are the basic test and the disability test. Under the basic test, two people will have an interdependency relationship if: · they have a close personal relationship (ie a demonstrated and ongoing commitment to the emotional support and wellbeing of the two parties) · they live together · one or each of them provides the other with financial support · one or each of them provides the other with domestic support and personal care (domestic support and personal care is commonly of a frequent and ongoing nature. For example, domestic support includes attending to the shopping, cleaning, laundry like activities. Personal care commonly consists of assistance with mobility, personal hygiene and generally ensuring the physical and emotional comfort of a person). If you do not satisfy the basic test, you may still be in an interdependency relationship if you qualify under the disability test. Two people are in an interdependency relationship under the disability test if: · they have a close personal relationship; and · they do not satisfy one or more of the other requirements of the basic test because either or both of them suffer from a physical, intellectual or psychiatric disability (the extent to which a person requires assistance with the activities of daily living would be an indication of the level of a person's disability). In your situation a lump sum superannuation death benefit was paid to a legal personal representative. Superannuation death benefits dependants include spouses, children under 18, those with an interdependency relationship and other dependants. You are claiming to fit into the interdependency relationship category. Therefore in order to be a death benefit dependant, you would need to satisfy the requirements and show that you had an interdependency relationship with the deceased. The criteria will be considered. Close personal relationship The Supplementary Explanatory Memorandum to the Superannuation Legislation Amendment (Choice of Superannuation Funds) Bill 2004, states at paragraph 2.21 that 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. You state: · your sibling drove you to shops, markets, religious institution and the library on a regular basis · you dined out together with relatives and friends · you went on holidays together and they took care of you during your travels. While these actions indicate a relationship, it is more suggestive of friends or flatmates. You have not shown an ongoing commitment to the emotional support and well-being of the two of you. You have not shown that you had a close personal relationship. You do not satisfy the requirements for this criterion. Live together Your sibling lived with you for a few years prior to their death. As you lived together, you satisfy this requirement. Financial support Your sibling paid you a weekly amount towards household expenses. As they provided you with financial support, this requirement is satisfied. Domestic support and personal care This covers significant 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, significant care provided for the other person when they are unwell or suffering emotionally. However, the preparation of a meal or assistance with medication when a person is unwell would not normally of itself satisfy this provision. You have stated that your sibling: · assisted you with cooking, laundry and other household chores · drove you to your medical operation and cooked and cared for you during your recuperation. You did the same when they had their medical operation · drove you to your medical appointments and you accompanied them to their medical appointments for moral support · used to mow the lawn and vacuum the house until a medical condition prevented them, after which, you relied on a gardener and a cleaner · undertook repairs or hired a tradesman · drove you to the shops, markets, religious institution and library on a regular basis While these actions indicate a level of domestic support, they are more indicative of a friend or a flatmate 'helping out'. You have also not shown any level of personal care from either you or your sibling. You have not shown ongoing domestic support of a nature more than that of a friend or flatmate. You have also not shown that you fulfil the requirements of personal care. You do not satisfy this requirement. Disability test If you do not satisfy one or more of the other requirements of the basic test because either or both of you suffer from a physical, intellectual or psychiatric disability, you may still be in an interdependency relationship if you satisfy the disability test. You have not advised of any physical, intellectual or psychiatric disability. It is therefore not appropriate to consider the disability test. Summary In order to be in an interdependency relationship, you must satisfy all four conditions in subsection 302-200(1) of the ITAA 1997. · you were not in a close personal relationship · you did live together · your sibling did provide you with financial support · there was no domestic support and personal care. As you have not satisfied two of the four conditions in subsection 302-200(1) of the ITAA1997, You and your sibling were not in an interdependency relationship. | Summary: You are not a death benefits dependent and so your part of the superannuation death benefit is not tax free under section 302-60 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Section 302-60 of the ITAA 1997 explains when a lump sum superannuation payment is tax free. Section 302-60 of the ITAA 1997 states: A superannuation lump sum that you receive because of the death of a person of whom you are a death benefits dependant is not assessable income and is not exempt income. You and your sibling were not in an interdependency relationship and therefore you are not a death benefits dependant. As section 302-60 of the ITAA 1997 only applies to death benefits dependents, it does not apply in these circumstances.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Does Part IVA apply to this ruling?: Part IVA of the Income Tax Assessment Act 1936 is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website www.ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select: Part IVA: the general anti-avoidance rule for income tax.