Private ruling: Superannuation death benefit - interdependency
Date of advice: 1 October 2021
Published: December 2021
Ruling period: Income year ending 30 June 20XX.
Date scheme commenced: 1 July 20XX.

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

Relevant facts and circumstances: The Beneficiary is the parent of the Deceased. The Deceased died on XX month XXXX. A superannuation Death benefit lump sum was paid to the deceased estate. The Beneficiary is entitled to 50% of the death benefit. The Deceased was living with the Beneficiary at the time of the deceased's death and had been doing so since month 20XX. The Beneficiary attended many meetings and held discussions with health professionals who treated the Deceased including psychologists' and psychiatrists. The Beneficiary assisted the Deceased in gaining admittance hospital. The deceased was admitted for a period of XX weeks due to severe anxiety/medication anxiety. The Deceased was living with the beneficiary at the time of the death and had been doing so since December 20XX. The deceased was paying the beneficiary an amount of $XX per week to assist with upkeep of the family home including: • food purchases • electricity • gas • water • telephone • internet and streaming. The Deceased was financially dependent on the Beneficiary as the Deceased person received sufficient financial support from: The Beneficiary was not charging the Deceased any rent. This was estimated to be $XX a week based on the cost of renting a room in the area. The Beneficiary was paying the living costs for the Deceased for the period month 20XX to month 20XX whilst unemployed. This was estimated to be about $XX a week based on $XX for food and $X for utilities, internet and streaming. The Beneficiary cared for the Deceased from XX month XXXX to XX month XXXX by providing: • financial support, including paying for their food and utility bills including electricity, internet and streaming. • domestic support, including attending to cleaning, cooking, washing and shopping • personal care and assistance, including, attending many meetings with health professionals, organising for admittance to hospital and the metal health unit • emotional support, including making decisions for him as he was unable to due to his obsessive and compulsive disorder. The Deceased provided domestic support by sharing household duties with the Beneficiary and included: • cleaning the downstairs living area • putting out the garbage • watering plants • cooking meals • shopping. In the periods the deceased lived away from the beneficiary, they maintained a close relationship. Some activities they shared included: • social golf • fishing trips • dining out • family gatherings at Easter, Christmas and birthdays.

Relevant legislative provisions: 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) 302-200.02

Reasons for decision: Summary: An interdependency relationship as defined under subsection 302-200(1) of the Income Tax Assessment Act 1997 (ITAA 1997) existed between the Deceased and the Beneficiary as all the requirements which are set out in the relevant legislation have been satisfied. Therefore, the Beneficiary is a death benefits dependant of the Deceased. | Detailed Reasoning - Detailed reasoning: 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. As the Beneficiary is the parent of the Deceased, paragraphs 302-195(1)(a) and (b) are not applicable. 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. The Beneficiary was not financially dependent on the Deceased person and therefore, paragraph 302-195(d) is not applicable. 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: 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. 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. 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): • the duration of the relationship • the degree of mutual commitment to a shared life • the degree of emotional support • any evidence that the parties intend the relationship to be permanent; and 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. Regulation 302-200.02 of the ITAR 2021 sets out the circumstances in which two people have an interdependency relationship. Subregulation 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 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. 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: 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. 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. 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) • The above indicators are not an exclusive list and none of them are required for a close personal relationship to exist. • 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. 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 and specifically that last few years due to the deceased's illness. The Beneficiary provided the Deceased with intensive and ongoing emotional, domestic and financial support. This level of care exceeded the care and comfort that would usually be provided by a parent to an adult child. They had an exceptionally close relationship. Further details of their care arrangements are provided below, under Financial Support and Domestic Support and Care. 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: 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. 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. Just prior to the Deceased's death, the Beneficiary and the Deceased lived together. The Beneficiary and the Deceased lived together for the period December 2017 to February 2020. The only exception was when the deceased was admitted to hospital or the metal health unit when his mental state had worsened. Consequently, the requirement specified in paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied in this case. | 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 of financial support (not necessarily substantial) is being provided by one person (or each of them) to the other. From the facts presented, the Deceased did not have sufficient income due to being unemployed and was financially dependent on the Beneficiary to pay for their food, clothing, utility bills, medical expenses and provide them with accommodation. Therefore, the Beneficiary provided the Deceased with financial support during the final years of the Deceased's life. Consequently, 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, 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. From the facts presented, the Beneficiary provided the Deceased with significant assistance, including taking the Deceased to medical appoints, consulting with health professionals, preparing meals, cleaning and doing the laundry.. In addition, the Deceased provided the Beneficiary with significant domestic support by assisting with cleaning, cooking, washing up and shopping. Therefore, the requirement in paragraph 302-200(1)(d) has been satisfied. | Detailed Reasoning - Conclusion: 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. 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.