Private ruling: Death benefit - interdependency
Date of advice: 1 July 2015
Published: July 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Was the member in an interdependency relationship with the deceased as defined under section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: The member is a child of the deceased. The deceased passed away during the 2014-15 income year. The deceased suffered from an illness some time ago and their partner had passed away. The member was the main carer for the deceased following the passing of their partner. The member has resided with the deceased at their family home for a number of years. The residence was in the deceased's name. During the 2014-15 income year, the member and the deceased moved to a new residence. This residence was in the member's name. The house was built to better accommodate the needs of the member, the deceased and their family. It contained an ensuite in the deceased's room, wheel chair access and bigger rooms. You state that the deceased moved to the new residence because their health and physical condition had worsened to the point that they could not live by themselves. During the 2014-15 income year the deceased was diagnosed with a terminal illness and would ultimately require full time palliative care in the final weeks of their life. The deceased lived with the member up till their passing. You state that the member would attend to the maintenance of the deceased's residence, gardening and lawn mowing. The member would organise the meals and the other outgoings for the daily functioning of the household. The member would take the deceased to the doctors, podiatrist, dentist and optical appointments. The member would also pay for all the food in the household, clothes and for the maintenance of the house. The member would provide personal care to the deceased, which included assisting the deceased get in and out of the car and administering daily medication to the deceased. The member also provided personal care to the deceased, including grooming, cutting hair, trimming nails, applying creams and putting compression stocking socks and shoes on for the deceased.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 27AAB. | Income Tax Assessment Act 1997 Division 302 of Part 3-30. | Income Tax Assessment Act 1997 section 302-195. | Income Tax Assessment Act 1997 subsection 302-200(1). | Income Tax Assessment Act 1997 subsection 302-200(2). | Income Tax Assessment Act 1997 subsection 302-200(3).

Reasons for decision: Summary: The member 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 - Detailed reasoning: 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 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 paragraphs (a) (b) or (d) of the above definition do not apply to the member, paragraph 302-195(c) of the ITAA 1997 may apply if the member were in an interdependency relationship with the deceased. | Detailed Reasoning - Interdependency relationship: Subsection 302-200(1) of the ITAA 1997 states: 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. All of the conditions in subsection 302-200(1) of the ITAA 1997, or alternatively both the condition in paragraph 302-200(1)(a) and the condition in subsection 302-200(2), must be satisfied for a person to be in an interdependency relationship with another person. 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. To assist in determining whether two persons have an interdependency relationship, paragraph 302-200(3)(a) of the ITAA 1997 states that the regulations may specify: (a) the matters that are, or are not, to be taken into account; and (b) the circumstances in which two persons have, or do not have an interdependency relationship under section 302-200 of the ITAA 1997. It is proposed to deal with each condition of subsection 302-200(1) of the ITAA 1997 in turn. | Detailed Reasoning - Close personal relationship:: Paragraph 302-200(1)(a) of the ITAA 1997 states that two persons (whether or not related by family) must have a close personal relationship. 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) Bill 2004 which inserted former section 27AAB of the Income Tax Assessment Act 1936 . This section dealt with interdependency relationships prior to 1 July 2007. In discussing the meaning of close personal relationship, the SEM states: 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 (for example 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. The Explanatory Statement (ES) to the Income Tax Amendment Regulations 2005 (No. 7) (the Regulations) which inserted former regulation 8A of the Income Tax Regulations 1936 , stated that the purpose of the Regulations was to specify matters that are, or are not, to be taken into account in determining whether two people have an interdependency relationship. An extract of the ES to the Regulations is as follows: Subregulation 8A(1) lists a number of matters that are to be taken into account when determining whether two people have an interdependency relationship, or whether two people had an interdependency relationship immediately before the death of one of them. … Each of the matters listed is to be given the appropriate weighting under the circumstances. The degree to which any matter is met or is present or not, as the case may be, does not necessarily of its own accord, confirm or preclude the existence of an interdependency relationship. Generally speaking, it is not expected that children will be in an interdependency relationship with their parents. A close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not normally exist between parents and their children because there would not be a mutual commitment to a shared life between the two. The facts show that the member is a child of the deceased and that a close familial relationship existed between the member and the deceased prior to, and at the time of, the deceased's death. Further, there is no evidence to suggest that the deceased intended to cease residence with the member and become independent prior to their death in view of: (a) The deceased received domestic support and personal care from the member during the 2014-15 income year following their diagnosis of the terminal illness; (b) The duration that the member resided with the deceased at the deceased's residence; (c) The deceased moved with the member to the member's new residence. The new residence contained an ensuite, bigger room and wheel chair access for the deceased; and (d) The deceased resided at the new residence prior to their passing. Based on the circumstances outlined above, it is considered that there was a mutual commitment to a shared life by between the member and the deceased as required by paragraph 302-200(1)(a) of the ITAA 1997. | Detailed Reasoning - Cohabitation:: Paragraph 302-200(1)(b) of the ITAA 1997 states that two persons live together. You have provided that the member has resided with the deceased for a number of years and up till the deceased's passing. Consequently, it is considered that paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied in this instance. | Detailed Reasoning - Financial support:: 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. 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 facts show that the member has contributed to the deceased's food, medicine, clothing, and house maintenance costs. In this instance, it is established that financial support was provided in the between the persons in the relationship. Consequently, it is considered that paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied. | Detailed Reasoning - Domestic support and personal care:: The fourth requirement to be met is specified in paragraph 302-200(1)(d) of the ITAA 1997, and 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. You have stated the member would provide personal care to the deceased, which included assisting the deceased get in and out of the car and administering daily medication to the deceased. The member also provided personal care to the deceased, including grooming, cutting hair, trimming nails, applying creams and putting compression stocking socks and shoes on for the deceased. The deceased provided personal care to the member preparing food, cooking, cleaning, washing of dishes, gardening and watering and collecting mail. 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 member and the deceased were in an interdependency relationship prior to, and up to, the time of their death. As the member was in an interdependent relationship with the deceased it follows that the member is a death benefits dependant of the deceased within the definition in section 302-195 of the ITAA 1997.