Private ruling: Interdependency
Date of advice: 30 June 2020
Published: August 2020
Ruling period: Income year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are the Beneficiaries death benefit dependants 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 they died? | A1: Yes

Relevant facts and circumstances: The Deceased died, aged 38 years. The Deceased had a disability that was diagnosed in early childhood. The Beneficiaries are parents of the Deceased. The Deceased's illness impacted them, and they were unable to obtain full-time employment. The Deceased never married and did not have children. The Deceased was living with the Beneficiaries at the time of their death. The Beneficiaries provided domestic and social support as well as personal care. The Deceased was unable to obtain a driver's licence, therefore they provided transport. The Deceased supported the Beneficiaries by providing care to them during ill health as well as assisting with household chores, vacuuming, shopping, and assisting with technology issues. As the Deceased was living with the Beneficiaries, they were able to financially support each other with the running of the house. The Deceased's last will and testament appointed the father as executor of the estate and nominated the beneficiaries and a sibling as joint beneficiaries. The Deceased has signed a document provided to their superannuation fund stating that they nominated the estate to receive 100% of the death benefit.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 302-195 | Income Tax Assessment Act 1997 section 302-200 | Income Tax Assessment Regulations 1997 Regulation 302-200.01

Reasons for decision: Summary: An interdependency relationship as defined under section 302-200 of the ITAA 1997 existed between the Deceased and the Beneficiaries just before the Deceased died. Therefore, the Beneficiaries are death benefits dependants of the Deceased as defined in section 302-195 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Subsection 302-195(1) of the ITAA 1997 defines a death benefits dependant of a person who has died as: (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 just before he or she died. * To find definitions of asterisked terms, see section 995-1 of the ITAA 1997. As the Beneficiaries are parents of the Deceased, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 do not apply. Therefore, to conclude that the Beneficiaries are death benefits dependants of the Deceased, it must be established that the Beneficiaries had an 'interdependency relationship' with the Deceased or that they were a 'dependant' of the Deceased just before the Deceased died. | Detailed Reasoning - What is an interdependency relationship?: Subsection 302-200(1) of the ITAA 1997 states that two persons (whether or not related by family) have an interdependency relationship 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(3) of the ITAA 1997 provides that matters and circumstances that are, or are not, to be taken into account in determining whether two persons have an interdependency relationship under that section may be specified in the regulations. To that effect, regulation 302-200.01 of the Income Tax Assessment Regulation 1997 (ITAR 1997) states that in considering paragraph 302-200(3)(a) of the ITAA 1997, matters to be taken into account are all relevant circumstances of the relationship between the persons, including (in this case): (a) the duration of the relationship, and (b) the degree of mutual commitment to a shared life, and (c) the degree of emotional support, and (d) the extent to which the relationship is one of mere convenience, and (e) any evidence suggesting that the parties intend the relationship to be permanent. Regulation 302-200.02 of the ITAR 1997 sets out circumstances in which two persons have, or do not have, an interdependency relationship under section 302-200 of the ITAA 1997 and states: 2 persons have an interdependency relationship if: (a) they satisfy the requirements of paragraphs 302-200(1)(a) to (c) of the ITAA 1997, and (b) 1 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. Examples of care normally provided in a close personal relationship rather than by a friend or flatmate 1. Significant care provided for the other person when he or she is unwell. 2. Significant care provided for the other person when he or she is suffering emotionally. | Detailed Reasoning - Close personal relationship: Generally, a close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not exist between a parent and child. This is because the relationship between a parent and 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 parents and child may be treated as an interdependency relationship for the purposes of subsection 302-200(1) of the ITAA 1997. In this case, it is considered that the relationship between the Beneficiaries and the Deceased was over and above that of a normal family relationship and that a close personal relationship existed as required by paragraph 302-200(1)(a) of the ITAA 1997. The matters that indicate that the Beneficiary and the Deceased had a close personal relationship are: · the Beneficiaries and the Deceased lived together until the Deceased's death · while the parties lived together they also provided each other with financial and domestic support and personal care · there is nothing to indicate that the relationship was one of mere convenience · the facts indicate that the relationship between the Deceased and the Beneficiaries was likely to be permanent and given the Deceased's disability and their reliance on each other for emotional support and personal care. | Detailed Reasoning - Living together: At the time of their death, the Deceased was living with the Beneficiaries. Accordingly, paragraph 302-200(1)(b) of the ITAA 1997 is satisfied as the Deceased and the Beneficiaries were living together at the time of the Deceased's death. | Detailed Reasoning - Financial support: Financial support under paragraph 302-200(1)(c) of the ITAA 1997 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, the facts indicate that the Beneficiaries and the Deceased provided each other with financial support as the monies received by all parties contributed to the household expenses. Therefore, it is considered that the Beneficiaries and the Deceased provided financial support to each other as required under paragraph 302-200(1)(c) of the ITAA 1997. | Detailed Reasoning - Domestic support and personal care: 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 Beneficiaries and the Deceased provided domestic support and personal care to each other an ongoing basis. Due to the Deceased being unable to obtain a licence, the Beneficiaries provided transport to the Deceased. The Deceased had a limited social life; the Beneficiaries were able to provide much needed care and support by taking them to social events. The Deceased supported the beneficiaries by completing domestic tasks including grocery shopping, vacuuming, assisting with technological issues such as the internet and providing assistance to the beneficiaries during their illnesses. Based on the above, the Beneficiaries meets all the requirements of an interdependency relationship for the purposes of subsection 300-200(1) of the ITAA 1997. Therefore, the Beneficiaries are death benefits dependant of the Deceased for the purposes of section 302-195 of the ITAA 1997. Consequently, it is not necessary to consider whether the Beneficiaries are a dependant of the Deceased under paragraph 302-195(d) of the ITAA 1997.