Private ruling: Death benefit - interdependency
Date of advice: 3 December 2015
Published: February 2016
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the taxpayer 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: The Deceased died during the relevant income year . The taxpayer is the parent of the Deceased. The taxpayer and the Deceased resided together for approximately 3 years. The Deceased resided with the taxpayer for most of their life, apart from a few breaks away where they lived interstate for approximately X months. The Deceased suffered a medical condition and saw a psychologist. They had suffered from medical condition, anxiety and substance abuse and depended on the taxpayer for emotional support. The taxpayer is physically disabled through multiple joint replacements that have failed and the Deceased was their full-time carer, to assist them with basic activities of daily living. They also assisted with housework and shopping. The taxpayer also suffers from a medical condition and panic attacks. The Deceased received full carer's payment through Centrelink, Domestic support and personal care was provided between the taxpayer and the Deceased, which included: • The Deceased attending to the grocery shopping every week; • The Deceased accompanying the taxpayer to appointments when they had a car, and then by catching a bus and taking a taxi home; • The Deceased did house chores and assisted the taxpayer with basic personal hygiene. Emotional support was provided between the taxpayer and the Deceased as both suffered from a medical condition and were dependent on each other for emotional support on a daily basis. Financial support was provided between the taxpayer and the Deceased, which included sharing household expenses and lawn maintenance. The Deceased and the taxpayer did not own any joint assets.

Relevant legislative provisions: Income Tax Assessment Act 1936 former section 27AAB. | Income Tax Assessment Act 1997 section 302-10. | 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.

Reasons for decision: Summary: The taxpayer is considered to be a death benefits dependant of the Deceased as they were in an interdependency relationship with the deceased at the time of their 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. As paragraphs (a), (b) or (d) of the above definition do not apply to the taxpayer, paragraph 302-195(c) of the ITAA 1997 is considered to determine whether the taxpayer was in an interdependency relationship with the Deceased just before the Deceased died. | Detailed Reasoning - Interdependency relationship: Relevantly, section 302-200 of the ITAA 1997 provides that two persons (whether or not related by family) have an interdependency relationship under that 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. 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. To that effect, 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 parent and child. This is because the relationship between parent 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 parent and their children may be treated as an interdependency relationship for the purposes of subsection 302-200(1) of the ITAA 1997. The relationship between the taxpayer and the Deceased and was over and above that of a normal family relationship in view of: • the taxpayer and the Deceased lived together up to the Deceased's death; • the taxpayer suffered from a physical disability and the Deceased was their full time carer and received full carer's payment from Centrelink; and • both suffered from a medical condition and anxiety and required the support of one another. Therefore, it is considered that a close personal relationship existed between the taxpayer 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, the taxpayer and the Deceased lived together. 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. The taxpayer and the Deceased provided financial support to one another by sharing the electricity, food expenses and lawn maintenance. 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. The Deceased provided the taxpayer with domestic support such as grocery shopping, taking them to appointments, and doing house chores. The Deceased also provided personal care to the taxpayer by assisting them with basic personal hygiene and they provided emotional support to one another as they both suffered from a medical condition and anxiety. 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, the taxpayer and the Deceased were in an interdependency relationship prior to, and up to, the time of their death. As the taxpayer was in an interdependent 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.