Private ruling: Death benefits dependant
Date of advice: 21 January 2021
Published: March 2021
Ruling period: Income year ended 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Did an interdependency relationship exist between your client and the deceased, in accordance with section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997 ) ? | A1: Yes.

Relevant facts and circumstances: Your client received a superannuation lump sum death benefit in the 2018-19 income year, as a non-dependant. The deceased had implemented a binding death benefit nomination with the relevant fund. Your client's parent died in the 2017-18 income year. Your client lived at home with the deceased for more than 30 years. You client was unemployed for several years prior to the deceased's death. The deceased paid for all the utility, rates and household expenses, as well as home and car insurance costs. The deceased also paid for your client's significant medical and legal expenses. Further, the deceased also paid your client a weekly amount for several years, even whilst residing at home. In the 2016-17 income year the deceased was diagnosed with a terminal illness. During the deceased's illness, your client drove the deceased to and accompanied them to their medical and chemotherapy appointments. Your client also cooked for the deceased, assisted with the household chores, the gardening, as well as assisting them with their medication and providing emotional support during their illness. During the deceased's illness, your client was also diagnosed with a rare illness requiring surgery. The deceased paid for those medical and associated surgery costs and provided your client with home care and emotional support during the period of their illness and recovery.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 302-195(1) | Income Tax Assessment Act 1997 Paragraph 302-195(1)(a) | Income Tax Assessment Act 1997 Paragraph 302-195(1)(b) | Income Tax Assessment Act 1997 Paragraph 302-195(1)(c) | Income Tax Assessment Act 1997 Paragraph 302-195(1)(d) | Income Tax Assessment Act 1997 Section 302-200 | Income Tax Assessment Regulations 1997 Regulation 302-200.01 | Income Tax Assessment Regulations 1997 Regulation 302-200.02 All references are to the ITAA 1997 unless otherwise indicated.

Reasons for decision: Summary: An interdependency relationship existed between your client and the deceased in the period just before her death. Therefore, your client is considered to be a dependant of the deceased. | Detailed Reasoning - Death benefits dependant: Division 302 of the Income Tax Assessment Act 1997 (ITAA 1997), sets out the taxation arrangements that apply to the payment of superannuation death benefits. These arrangements depend on whether the person that received the superannuation death benefit is a dependant of the deceased and whether the death benefit is paid as a superannuation lump sum or a superannuation income stream. 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. Subsection 302-195(1) 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 your client does not satisfy paragraphs (a) or (b) of the above definition, paragraphs (c) or (d) of section 302-195 need to be considered. | Detailed Reasoning - Interdependency relationship: Paragraph 302-195(c) of the definition of death benefits dependant, refers to an interdependency relationship. The term 'interdependency relationship' is defined in section 302-200, which states: (1) 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. (2) 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. (3) ... All of the conditions in subsection 302-200(1), or alternatively 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), states 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 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. Relevantly in this case, focus will be on whether an interdependency relationship existed with another person under subsection 302-200(1). | Detailed Reasoning - Close personal relationship: The first requirement to be met as specified in paragraph 302-200(1)(a), is that two persons (whether or not related by family) must have a close personal relationship. In accordance with regulation 302-200.02 of the ITAR 1997, two persons have an interdependency relationship if they satisfy the requirements of paragraphs 302-200(1)(a) to (c) and 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 a mere friend or flatmate. For example, significant care provided to another person when they are unwell or when they are suffering emotionally. Generally, a close personal relationship as specified in subsection 302-200(1) would not exist between a parent and a child. This is because the relationship between a parent and a child 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 a parent and child may be treated as an interdependency relationship for the purposes of subsection 302-200(1). In this case, it is considered that the relationship between your client and the deceased was over and above that of a normal family relationship, and beyond what might be expected of a friend or flatmate. A close personal relationship existed as required by paragraph 302-200(1)(a). The matters that indicate that your client and the deceased had a close personal relationship are: § your client always resided with the deceased for more than 30 years; § significant personal, financial and emotional support was provided to your client by the deceased; and § personal and emotional support was provided by your client to the deceased; during the time the deceased suffered from a serious illness. | Detailed Reasoning - Living together: The second requirement to be met is specified in paragraph 302-200(1)(b), and states that the two persons live together. The facts in this case show that your client and the deceased were living together at the time of the deceased's death. Therefore, the requirement specified in paragraph 302-200(1)(b) has been satisfied in this instance. | Detailed Reasoning - Financial support: The third requirement to be met is specified in paragraph 302-200(1)(c), and states that one or each of them provides the other with financial support. Financial support under paragraph 302-200(1)(c) is satisfied if some level (not necessarily substantial) of financial support is being provided by one person (or each of them) to the other. In this case, your client did receive financial support from the deceased whilst residing together. Your client was unemployed and during the relevant period the deceased paid for all the utility, rates and household expenses, as well as home and car insurance costs. The deceased also paid for some of your client's significant medical and legal expenses. It is therefore considered that paragraph 302-200(1)(c) has been satisfied. | Detailed Reasoning - Domestic support and personal care: The fourth requirement to be met is specified in paragraph 302-200(1)(d) and states that one or each of these two persons provides the other with domestic support and personal care. For the purposes of paragraph 302-200(1)(d) 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 service may consist of assistance with mobility, personal hygiene and generally ensuring the physical and emotional comfort of a person. From the facts provided, your client drove and accompanied the deceased to hospital and treatment appointments. When at home, they provided the deceased with emotional support, as well as assistance with cooking and household chores, assisting with medication and the gardening. In turn, during the time your client underwent surgery and was recovering from their illness, the deceased provided your client with home care and emotional support. It is considered that the requirement in paragraph 302-200(1)(d) has been satisfied in this instance. | Detailed Reasoning - Conclusion: Your client and the deceased had an interdependency relationship within the meaning of subsection 302-200(1).