Private ruling: Death benefit - interdependency
Date of advice: 26 July 2018
Published: September 2018
Ruling period: The year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Were the Taxpayer and the Deceased in an interdependency relationship as defined under section 302-200 of the Income Tax Assessment Act 1997 ? | A1: Yes

Relevant facts and circumstances: ● You are the Trustee for the Estate of the Deceased ● You applied for a private ruling relating to whether the Taxpayer was a death benefit dependant of the Deceased. In this application you provided the following information: ● The Deceased lived in his/her home. ● The Taxpayer is the legal administrator for the estate of the Deceased and is also the beneficiary of his/her estate. ● The Deceased was diagnosed with multiple medical illnesses. ● The Deceased was in the hospital for a few weeks and during that time the Taxpayer, visited him/her daily, and attended to all his/her needs including his/her payment of his/her bills as well as looking after the security and maintenance of his/her home. ● After being discharged from the hospital, the Deceased moved to the Taxpayer’s home. The Deceased made it clear that he/she did not want to finish his/her life separated from the Taxpayer and the Taxpayer was determined to honour his/her wishes through a voluntary and mutual commitment to a shared and permanent life together ● The Taxpayer became the Deceased’s personal carer and was available to nurse and assist the Deceased at any time, day or night. ● Whilst living with the Taxpayer, the Deceased’s health deteriorated which required the Taxpayer to provide intensive nursing care, emotional support and the facilitation of the Deceased’s personal comfort. ● The Taxpayer’s care of the Deceased also included funding and preparing meals, personal grooming, cleaning his/her room, laundering his/her clothes, personal shopping requirements , transporting him/her to hospital for appointments and to medical specialists for treatments and ensuring the security and maintenance of his/her home. The Deceased died. You provided information regarding the payment for expenses associated with maintaining the Deceased’s home.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 302-195. | Income Tax Assessment Act 1997 section 302-200. | Income Tax Assessment Act 1997 subsection 302-200(1). | Income Tax Assessment Act 1997 paragraph 302-200(1)(a). | Income Tax Assessment Act 1997 paragraph 302-200(1)(b). | Income Tax Assessment Act 1997 paragraph 302-200(1)(c). | Income Tax Assessment Act 1997 paragraph 302-200(1)(d). | Income Tax Assessment Act 1997 subsection 302-200(2). | Income Tax Assessment Act 1997 paragraph 302-200(2)(a). | Income Tax Assessment Act 1997 paragraph 302-200(2)(b). | Income Tax Assessment Act 1997 paragraph 302-200(2)(c). | Income Tax Regulations 1997 Regulation subregulation 302-200.01(2). Summary | It is considered that the Deceased and the Taxpayer did have an interdependency relationship as defined under section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997). Accordingly, the Taxpayer is a death benefits dependant of the Deceased. | Why we have made this decision | For superannuation death benefits made after 30 June 2007, the term ‘interdependency relationship’ is defined in section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997), which has replaced former section 27AAB of the of the Income Tax Assessment Act 1936 . Detailed reasoning | 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 who receives the superannuation death benefit is a dependant of the deceased or not and whether the amount is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit. | Where a person receives a superannuation death benefit and that person was a dependant of the deceased, it is not assessable income and is not exempt income. | 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 persons spouse or former spouse; or | (b) the deceased persons 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 Taxpayer cannot qualify under paragraphs (a), (b) or (d) of the above definition, paragraph (c) of section 302-195 of the ITAA 1997 needs to be examined. | Interdependency relationship | Paragraph (c) of the definition of ‘death benefits dependant’ in section 300-195 of the ITAA 1997 refers to the term ‘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. | 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. | Accordingly, 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. | 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 the matters that are, or are not, to be taken into account. | In addition, paragraph 302-200(3)(b) of the ITAA 1997 states that the regulations may specify the circumstances in which two persons have, or do not have an interdependency relationship under subsections 302-200(1) and (2). | For the purposes of paragraph 302-200(3)(a) of the ITAA 1997, subregulation 302-200.01(2) of the Income Tax Assessment Regulations 1997 (ITAR 1997) sets out the matters to be taken into account in determining whether two persons have an interdependency relationship. These matters include all of the circumstances of the relationship between the persons, including (where relevant): | (i) the duration of the relationship; and | (ii) whether or not a sexual relationship exists; and | (iii) the ownership, use and acquisition of property; and | (iv) the degree of mutual commitment to a shared life; and | (v) the care and support of children; 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 | (ix) any evidence suggesting that the parties intend the relationship to be permanent, … | It is proposed to deal with each condition of subsection 302-200(1) of the ITAA 1997 in turn. | Close personal relationship: | The first requirement to be met is specified in paragraph 302-200(1)(a) of the ITAA 1997. It 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) Act 2004 which inserted former section 27AAB of the ITAA 1936. 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. | In the explanatory statement to the Income Tax Amendment Regulations 2005 (No. 7) which inserted regulation 8A of the Income Tax Regulations 1936 , it is stated that: 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. In addition, an adult child’s relationship with their parents would be expected to change significantly over time. | In the application for the private ruling that we received, you advised that the Deceased was admitted to hospital. Whilst there was originally a familial relationship, this changed when the Deceased and the Taxpayer agreed that the Deceased would live in the Taxpayer’s home after being discharged. The Deceased made it clear that he/she did not want to finish his/her life separated from the Taxpayer and the Taxpayer was determined to honour his/her wishes through a voluntary and mutual commitment to a shared and permanent life together. | During this time the Taxpayer became the Deceased’s personal carer and was available to nurse and assist the Deceased at any time, day or night. Whilst living with the Taxpayer, the Deceased’s health deteriorated, requiring intensive nursing care, emotional support and the facilitation of the Deceased’s personal comfort. | Accordingly, it is accepted that a ‘close personal relationship’ existed between the Deceased and the Taxpayer as envisaged by paragraph 302-200 (1)(a) of the ITAA 1997. | Cohabitation: | The second requirement to be met is specified in paragraph 302-200(1)(b) of the ITAA 1997 and states the two persons live together. | From the facts provided, after being discharged from the hospital, the Deceased and the Taxpayer agreed that the Deceased would live in the Taxpayer’s home from that date. | Therefore the requirement under paragraph 302-200(1)(b) of the ITAA 1997 has been met. | Financial support: | The third requirement to be met is specified in paragraph 302-200(1)(c) of the ITAA 1997, and states that one or each of these two persons provides the other with financial support. | The Taxpayer’s care of the Deceased also included financial support to the Deceased by purchasing meals, personal shopping requirements and, incurring transport costs in relation to hospital appointments and medical specialists and by paying for expenses associated with ensuring the security and maintenance of his/her home. | Therefore the requirement under paragraph 302-200(1)(c) of the ITAA 1997 has been met. | Domestic support and personal care: | The fourth requirement 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. | The term ‘personal care’ is also discussed in the New South Wales Supreme Court in Dridi v. Fillmore [2001] NSWSC 319. Master Macready stated, in regards to the term ‘domestic support and personal care’, that: | The expression [personal care] seems to be directed to a different level of reality such as assistance with mobility, personal hygiene and physical comfort. Such activities obviously however will include an element of emotional support. | In the application for the private ruling that we received, you advised that the Deceased was initially in hospital for a few weeks and during that time the Taxpayer visited him/her daily, and attended to all his/her needs including the payment of his/her bills, as well as looking after the security and maintenance of his/her home. | Upon the Deceased’s discharge from hospital into the Taxpayer’s home, the Taxpayer became the Deceased’s personal carer and was available to nurse and assist the Deceased at any time, day or night. Whilst living with the Taxpayer, the Deceased’s health deteriorated which required the Taxpayer to provide intensive nursing care, emotional support and the facilitation of the Deceased’s personal comfort. | Based on the level of domestic support and personal care provided to the Deceased by the Taxpayer, it is considered that the requirement under paragraph 302-200(1)(d) of the ITAA 1997 has been met. | Accordingly, it is considered that the Deceased and the Taxpayer did have an interdependency relationship as defined under section 302-200 of the ITAA 1997.