Private ruling: Superannuation death benefits: interdependency relationship
Date of advice: 23 December 2020
Published: March 2021
Ruling period: Income Tax year ending 30 June 2021. | Income Tax year ending 30 June 2022.
Date scheme commenced: 1 July 2020.

Ruling: Q1: Is the Beneficiary a death benefit dependant of the Deceased in accordance with section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997) by virtue of being in an interdependency relationship with the Deceased under section 302-200 of the ITAA 1997 just before the Deceased died? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 302-60 | 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 Subsection 302-200(3) | Income Tax Assessment Act 1997 Subsection 307-5(1) | Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax Assessment Regulations 1997 Regulation 302-200.01 | Income Tax Assessment Regulations 1997 Regulation 302-200.02

Reasons for decision: Detailed Reasoning - Death benefits dependant in relation to the superannuation death benefit: 1. Subsection 307-5(1) of ITAA 1997 defines a superannuation death benefit as 'A payment to you from a superannuation fund, after another person's death, because the other person was a fund member'. 2. 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 death benefits dependent is not assessable income and is not exempt income. 3. 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. 4. As the Beneficiary is a child of the Deceased, and is over the age of 18, paragraphs 302-195(1)(a) and (b) are not applicable. 5. The Beneficiary/Applicant has contended that the Beneficiary was in an interdependency relationship with the Deceased, in accordance with paragraph 302-195(1)(c) of the ITAA 1997. | Detailed Reasoning - Interdependency relationship: 6. 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. 7. Subsection 302-200(2) of the ITAA 1997 states, in addition, 2 persons (whether 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 suffer from a physical, intellectual or psychiatric disability. 8. 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 determining whether two persons have an interdependency relationship under subsections 302-200(1) and (2) of the ITAA 1997. 9. Subregulation 302-200.01(2) of the Income Tax Assessment Regulations 1997 (ITAR 1997) states the matters to be taken into account are as follows: (a) 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; and (b) the existence of a statutory declaration signed by 1 of the persons to the effect that the person is, or (in the case of a statutory declaration made after the end of the relationship) was, in an interdependency relationship with the other person. 10. 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 section 302-200 of the ITAA 1997. These are specified in regulation 302-200.02 of the ITAR 1997. 11. 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 1997 must be satisfied for a person to be in an interdependency relationship with another person. Each condition is considered below. | Detailed Reasoning - Close personal relationship: 12. 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'. 13. 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 1997. 14. 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 Income Tax Assessment Act 1936 (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. 2.15 It is not intended that people who share accommodation for convenience (e.g. 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. 15. In the Explanatory Statement to the Income Tax Amendment Regulations 2005 (No.7) , which inserted Regulation 8A into the Income Tax Regulations 1936 , it stated that: Generally speaking, it is not expected that children will be in an interdependency relationship with their parents. 16. As stated above, the intention of the law is that 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. It would be expected that the adult child would eventually move out and secure independence from their parents. 17. In this case, the Beneficiary is the child of the Deceased. It is clear that a close family relationship existed prior to, and at the time of the Deceased's death. 18. Due to the Deceased's ongoing health problems, the Beneficiary lived with the Deceased from 20XX until the Deceased's death on XX early 20XX and provided the Deceased with emotional and domestic support. It was the both the Deceased's and the Beneficiary's (and the Deceased's child 2's) intention for the Beneficiary to live with the Deceased to care for them until they were to pass away. Such an intention was documented in a Deed of Family Arrangement (dated XX August 20XX), entered into between the Deceased, the Beneficiary and the Deceased's child 2. 19. In respect of emotional support, it is accepted the Beneficiary provided a significant degree of support to the Deceased, who for many years had been widowed; had a low level of social contact with others; suffered a physical illness; and had mental health issues. 20. It is clear that a loving and supportive relationship existed between the Beneficiary and the parent, the Deceased. Due to the Deceased's ongoing illness, the relationship between the Beneficiary and the Deceased was above and beyond what would be expected for an adult child and their parent. It is considered that, overall, the relationship between them is of the type envisioned by the legislation. 21. Accordingly, the first requirement specified in paragraph 302-200(1)(a) of the ITAA 1997 has been satisfied in this case. | Detailed Reasoning - Living together: 22. The second requirement to be met is specified in paragraph 302-200(1)(b) of the ITAA 1997, and states that two persons live together. 23. Prior to and at the time of the Deceased's death, the Deceased and the Beneficiary were living together in the Deceased's home. The Beneficiary and the Deceased lived together for a total of almost 40 years, and continuously from approximately 20XX until the Deceased's death. 24. Consequently, it is considered that paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied in this instance. | Detailed Reasoning - Financial Support: 25. 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. 26. Financial support under paragraph 302-200(1)(c) is satisfied if some level of financial support (not necessarily substantial) is being provided by one person (or each of them) to the other. 27. From 20XX onwards, the Deceased allowed the Beneficiary to live in their apartment rent-free. The Deceased also paid for all food/groceries consumed by the household; all utilities expenses of the household, including water, gas, electricity, phone/internet; the strata levies on the family home; the council rates on the family home; maintenance and repairs to the family home, for example, cleaners, plumbers, electricians, repair to whitegoods etc. The Deceased allowed the Beneficiary to make use of the motor vehicle to do grocery shopping for the household and for their own personal transport. 28. Therefore, it is clear that the Deceased provided the Beneficiary with financial support whilst living together in the family home. Consequently, it is considered that paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied in this instance. | Detailed Reasoning - Domestic support and personal care: 29. 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. 30. From the facts presented, the Beneficiary clearly provided domestic support to the Deceased on an ongoing basis. The Beneficiary provided the Deceased with significant assistance, including mobility and transportation; organising and attending medical appointments, consulting with medical practitioners; purchasing groceries and other shopping outings; managing the household budget etc. 31. Therefore, on the facts provided, it is considered that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied in this instance. | Detailed Reasoning - Conclusion: 32. As all of the requirements in subsection 302-200(1) of the ITAA 1997 have been satisfied in this case, it is considered that the Deceased and the Beneficiary were in an interdependency relationship in the period prior to, and at the time of, the Deceased's death. 33. As the Beneficiary was considered to be in an interdependency relationship with the Deceased, the Beneficiary is a death benefits dependant as defined under section 302-195 of the ITAA 1997.

Family and living arrangements: 1. The Deceased passed away in Early 20XX. | 2. The Deceased, a widow since 20XX, has an adult child ('the Beneficiary') and an adult child 2 ('the Deceased's child 2'). | 3. Approximately eight years prior, the Deceased's spouse had died. The Deceased and the Beneficiary continued to live in the family home (the Deceased's child 2 was living with their spouse). | Formalisation of care arrangements: 4. In August 20XX, about five years before the Deceased's death, the Deceased executed an instrument appointing the Beneficiary, the Deceased's child 2 and another family member as the Deceased's enduring guardians. | 5. On the same day, the Deceased executed a power of attorney appointing the Beneficiary, the Deceased's child 2 and another family member as their attorneys under a power of attorney. | 6. On or around the same day, the Deceased, the Beneficiary and the Deceased's child 2 executed a Deed of Family Arrangement ('Deed'), which contemplated that the Beneficiary would continue to live with the Deceased and perform the role of the Deceased's primary carer. | Deceased's health and medical needs: 7. The Deceased suffered from a spinal illness which caused the Deceased to experience pain and which impaired their mobility. | 8. The Deceased experienced periods of mental unwellness, which required police intervention followed by hospitalisation as a psychiatric patient on a number of separate occasions. | 9. In 20XX, the Deceased's general practitioner took over primary responsibility for prescribing the Deceased's mental health medication. | 10. The Beneficiary was responsible for assisting with the following aspects of the Deceased's treatment by performing the following tasks: | a. Organising appointments with the psychiatrists and the Mental Health Team. | b. Organising appointments with the Deceased's general practitioner. | c. Advising the Mental Health Team of the Deceased's behaviour and mood. | d. Ensuring that the Deceased took their medication as prescribed. | e. Reporting any non-compliance as to medication to the Mental Health Team. | 11. In January 20XX, the Deceased suffered an intracerebral haemorrhage. The Beneficiary summoned an ambulance and attempted to resuscitate the Deceased. The medical interventions ultimately failed, and the Deceased died. | Relationship between the Deceased and the Beneficiary: 12. Following the death of the Deceased's spouse (the Beneficiary's parent), the Beneficiary was the primary carer for the Deceased, and in this capacity, was responsible for the Deceased's general welfare, health care, and the management of the Deceased's assets. | 13. The Beneficiary and the Deceased lived together for a total of almost 40 years, and continuously from approximately 2010 until the Deceased's death in early 20XX. | a. The Deceased allowed the Beneficiary to live in their apartment and the Beneficiary was not charged rent. | b. The Deceased paid for all food/groceries consumed by the household. | c. The Deceased paid for all utilities expenses of the household, including water, gas, electricity, phone/internet. | d. The Deceased paid the strata levies on the family home. | e. The Deceased paid the council rates on the family home. | f. The Deceased paid for maintenance and repairs to the family home, for example, cleaners, plumbers, electricians, repair to whitegoods etc. | g. The Deceased allowed the Beneficiary to make use of their motor vehicle to do grocery shopping for the household and for their own personal transport. | Provision of domestic support and personal care: 15. The Beneficiary performed all the weekly grocery shopping for the household. | 16. The Beneficiary purchased all other items required for household operations either by obtaining the items from a physical store or ordering online. | 17. The Beneficiary transported the Deceased to specialist medical appointments as required, including assisting the Deceased with personal mobility where necessary. | 18. The Beneficiary monitored the Deceased's compliance with their medication. | 19. The Beneficiary consulted with the Deceased's doctors and mental health professionals and assisted in the Deceased's medical treatment by providing observations regarding the Deceased's behaviour, mood, and compliance with her medication regime. | 20. The Beneficiary organised medical assistance for the Deceased when they were unwell, for example, arranging medical appointments. | 21. The Beneficiary managed the household budget on behalf of the Deceased. | 22. The Beneficiary prepared all of the Deceased's income tax returns. | 23. The Deceased did all the cooking for the household. | 24. The Deceased did all the laundry for the household. | 25. The Beneficiary was the Deceased's primary source of social interaction, with the Deceased having quite limited social interaction with other people (other than family members). | 26. The degree of emotional support provided by the Beneficiary to the Deceased was necessarily high because the Deceased had a low level of social contact with others. and over dinner. | 27. The degree of emotional support provided by the Deceased to the Beneficiary was high because: | a. following the death of the parent, and sibling relocation overseas, the Beneficiary only had the Deceased as a family member in the local area, and | b. the Beneficiary was unmarried and did not have any children of their own. | 28. It was necessary for the Beneficiary to be in close proximity to the Deceased in order for them to observe whether the Deceased was adhering to their medication regime; whether the Deceased was sleeping properly; and any unusual changes in the Deceased's mood etc. | 29. The consequences of the Deceased becoming mentally unwell were serious and life-threatening, necessitating the Beneficiary's presence in the family home. | Ownership and use of property: 30. The Deceased and the Beneficiary each held their own assets separately. No family assets were held jointly. | 31. The Beneficiary had use of and benefitted from the Deceased's assets in that: | a. the Beneficiary lived in the Deceased's apartment rent-free | b. the Beneficiary made use of the Deceased's motor vehicle at no charge, and | c. the Beneficiary benefitted from the Deceased covering the cost of food, utilities, strata levies, council rates and other household expenses.