Private ruling: Superannuation death benefits- interdependency relationship
Date of advice: 16 December 2021
Published: March 2022
Ruling period: Period ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Was the Beneficiary in an interdependency relationship with the Deceased in accordance with section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No.

Relevant facts and circumstances: The Deceased's biological father moved overseas when she was young and had no contact with her since then. The Mother of the Deceased lived with the Partner and had the Beneficiary as their child. The Deceased, the Beneficiary, the Mother,and the Partner lived together at the family home. The Mother suffered from chronic health conditions while the Partner had other health issues to deal with. The Deceased and the Beneficiary had always shared a bedroom in the family home, went to school together and had been close. An older woman (the Relative) who was related to the Mother by blood lived by herself in her house in a different state, suffered from an illness and stayed with the Mother, the Partner, the Deceased and Beneficiary's family home for several years until she was moved to an aged care facility. The Deceased started to get regular income through her special talent and skills at a young age. The Deceased paid for many of the Beneficiary's expenses including clothes and would pay for their shared interests and activities. In 20XX, the Deceased moved out of the family home to live interstate. She stayed at the Relative's house by herself and found employment there. The Beneficiary intended to come and live together with the Deceased interstate in the Relative's house after she finished her university degree. The Mother and the Beneficiary visited the Deceased on five separate occasions and the Deceased visited her family on five separate occasions.The Deceased paid for the Beneficiary's expenses while visiting her. In 20XX, the Deceased was diagnosed with an acute illness while visiting her family in the family home interstate. The Deceased stayed with her family in the family home during her hospital stays and treatments. In 20XX, the Deceased signed an enduring power of attorney appointing the Mother and the Beneficiary as attorneys severally in respect of both financial and personal/ health matters. She also made a will appointing the Mother as the executor of her estate. She left her entire estate to the Beneficiary. The Deceased's treatment was extremely taxing both physically and emotionally and was frequently hospitalised. The Beneficiary supported the Deceased throughout her treatments and hospitalisation with her personal needs like helping with cleaning, cooking, taking medication, bathing, correspondence, taking to medical appointments into her wheelchair and others. She was also a constant source of love, support, and companionship to the deceased. In 20XX, the Relative died while in residential care. The Deceased and the Beneficiary were the beneficiaries of her estate including the sales proceeds of her house interstate where the Deceased lived prior to being diagnosed with an acute illness. In 20XX, the Deceased was admitted to hospital for a procedure related to her acute illness. The Beneficiary stayed at a nearby accommodation and then at an apartment across the hospital where the Deceased stayed and visited and cared for the Deceased everyday. In 20XX, the Deceased and the Beneficiary signed a contract for the purchase of a property. The Deceased and the Beneficiary planned to use their inheritance from the Relative to fund the property purchase and live in it together. The Deceased would meet the ongoing expenses of the property from her income and the Beneficiary would look after and care for the Deceased through to her recovery. The Deceased's condition deteriorated after her hospital procedure and died in 20XX. In 20XX, property settlement for the contract of the property occurred with the Beneficiary. The Beneficiary lived in the property for a time before returning to live back with in the family home with her parents. The Deceased was a member of a superannuation fund. In 20XX, the Mother as trustee of the estate of the deceased received a lump sum payment from the superannuation fund.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 302-195 | Income Tax Assessment Act 1997 section 302-200 | Income Tax Assessment Regulations 1997 subregulation 302-200.01(2)

Reasons for decision: Summary: An interdependency relationship did not exist between the Deceased and the Beneficiary because the requirements under section 302-200 of the ITAA 1997 had not been met. | Detailed Reasoning - Meaning of death benefits dependant: 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 that receives the superannuation death benefit is a dependant of the deceased. A superannuation death benefit is defined in section 307-5 of the ITAA 1997 as: A payment to you from a superannuation fund, after another person's death, because the other person was a fund member. 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; 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 adult sibling 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 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. 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. 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 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 • whether or not a sexual relationship exists • the ownership, use and acquisition of property • the degree of mutual commitment to a shared life • the care and support of children • the reputation and public aspects of the relationship • the degree of emotional support • the extent to which the relationship is one of mere convenience • any evidence that the parties intend the relationship to be permanent; and • the existence of a statutory declaration signed by one 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. 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. Subregulations 302-200.02(3) and (4) of the ITAR 2021 provide that an interdependency relationship also exists between two people where: • they have a close personal relationship; and • they do not satisfy the other requirements set out in subsection 302-200(1) of the ITAA 1997 because: they are temporarily living apart, for example because one of them is temporarily working overseas or in gaol; or one (or both) of them suffers from a disability. Subregulation 302-200.02(5) of the ITAR 2021 states that two persons do not have an interdependency relationship if one of them provides domestic support and personal care to the other: a) under an employment contract or a contract for services; or b) on behalf of another person or organisation such as a government agency, a body corporate or a benevolent or charitable organisation. 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 Deceased and the Beneficiary lived together with their parents in their home as a family unit. The Deceased moved out of the family home and lived independently in another state and found a job there. There was an intention in the future that the Beneficiary after her graduation from university, will move in and share accommodation with the Deceased interstate in the house where the Deceased lived. The Deceased stayed with her family at the family home after she became ill during one of her visits for support from her family during her hospital stays and treatments. The Deceased stayed in hospital to prepare for a procedure and died soon after while in hospital. The Deceased and the Beneficiary signed a contract to purchase a property while the Deceased was in hospital and intended to live together. The Deceased and the Beneficiary previously lived together as part of a family unit with their parents. When the Deceased moved out of the family home, the planned living arrangements for the Deceased and the Beneficiary are considered to be one of mere convenience and did not show some degree of permanency due to their young age. They failed to demonstrate that there was 'a mutual commitment to a shared life' between them. The living arrangements and the interactions that existed between the Beneficiary and the Deceased as siblings showed that there were no unusual and exceptional circumstances that existed which would demonstrate that the relationship goes beyond the usual relationship between two adult siblings and therefore, does not satisfy paragraph 302-200(1)(a) of the ITAA 1997 . | 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. Alternatively, paragraph 302-200(2)(c) of the ITAA 1997 provides that 2 persons (whether or not related by family) have an interdependent relationship if they have a close personal relationship, but does not satisfy one or more of the requirements mentioned in paragraphs 1(b), (c), and (d) under section 302-200 of the ITAA 1997, and the reason they do not satisfy those requirements is because either or both of them suffer from a physical, intellectual or psychiatric disability. 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. The Beneficiary and the Deceased lived together with their parents at their home as a family unit. The Deceased moved out of the family home and lived interstate and found a job there, with the intention that the Beneficiary will move in with the Deceased after graduation from university. The Deceased stayed at the family home after she became ill during one of her visits for support from her family during her hospital stays and treatments. The Deceased stayed in hospital to prepare for a procedure and died soon after while in hospital. The Deceased and the Beneficiary signed a contract to purchase a property while the Deceased was in hospital and intended to live together. The facts do not refer to 'any evidence suggesting that the siblings intended the relationship to be permanent'. Further, they failed to demonstrate a 'strong mutual commitment to a shared life'. The Deceased and the Beneciary's living arrangements did not show some degree of permanency and therefore, does not satisfy paragraph 302-200(1)(b) of the ITAA 1997. If the Deceased and the Beneficiary's living arrangements did not show some degree of permanency and there was no ' strong mutual commitment to a shared life' before the Deceased was hospitalised until her death, it could not be argued that the reason they could not satisfy paragraph 302-200(1)(b) of the ITAA 1997 is because either or both of them suffer from a physical, intellectual or psychiatric disability. The Deceased and the Beneciary's living arrangements did not show some degree of permanency prior to the Deceased being hospitalised until her death and therefore, does not satisfy paragraph 302-200(2)(c) of the ITAA 1997. | 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. The facts contain an assertion that the Deceased provided the Beneficiary with some level of financial support and thereby, satisfies paragraph 302-200(1)(c) of the ITAA97. | 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. The Beneficiary supported the Deceased throughout her treatments and hospitalisation with her personal needs like helping with cleaning, cooking, taking medication, bathing, corresponedence, taking to medical appointmentsinto her wheelchair and others. She was also a constant source of love, support, and companionship to the deceased while the Deceased and the Beneficiary were living at home with their parents. The Beneficiary stayed at a foundation accommodation and then an apartment near the hospital when the Deceased was hospitalised for a procedure in relation to her acute illness and visited and cared for the Deceased everyday. The Beneficiary provided significant domestic support and personal care to the Deceased and thereby, satisfies paragraph 302-200(1)(d) of the ITAA 1997. | Detailed Reasoning - Conclusion: After consideration of the facts, it is therefore concluded that the requirements in accordance with section 302-200 of the ITAA 1997 had not been met and therefore, the Beneficiary was not in an interdependency relationship with the Deceased.