Private ruling: Death benefit - interdependency
Published: November 2014
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Were you in an interdependency relationship with the deceased as defined under section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: You are the child of the deceased. The deceased was diagnosed with a terminal illness and passed away during the 2013-14 income year. Prior to the deceased's death, the deceased resided in your home where they had lived for the past three to four years after the deceased's spouse had passed away. During the periods that the deceased was not at your residence they were working overseas as a missionary. The deceased had a shed, along with a room, at your home where they kept all their belongings. You have provided documents belonging to the deceased which show your residence as their postal address. You state that you provided financial support to the deceased in regards to food and living costs. The deceased provided you with domestic support by doing all the housework and cooking while you were at work. You state that you provided domestic support and personal care to the deceased by organising their daily meals, doing their personal shopping and driving them to events and doctor appointments. Further you managed the deceased's medications and financial matters along with obtaining equipment to aid the deceased's mobility and taking time off work to take care of them during their illness. You have not received any death benefit payments yet as a result of the deceased's death.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 27AAB. | Income Tax Assessment Act 1997 Division 302 of Part 3-30. | Income Tax Assessment Act 1997 section 302-195. | 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).

Reasons for decision: Summary: You are considered to be a death benefits dependant of the deceased as you were in an interdependency relationship with the deceased at the time of their death. | Detailed Reasoning - Detailed reasoning: Division 302 of the ITAA 1997 sets out the taxation arrangements that apply to the payment of superannuation death benefits. 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 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 paragraphs (a) (b) or (d) of the above definition do not apply to you, paragraph 302-195(c) of the ITAA 1997 may apply if you were in an interdependency relationship with the deceased. | Detailed Reasoning - Interdependency relationship: 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. 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. Under subsection 302-200(2) of the ITAA 1997 two people who have a close personal relationship but cannot satisfy all of the other requirements of an interdependency relationship because of a physical, intellectual or psychiatric disability, may still have an interdependency relationship. 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: (a) the matters that are, or are not, to be taken into account; and (b) the circumstances in which two persons have, or do not have an interdependency relationship under section 302-200 of the ITAA 1997. It is proposed to deal with each condition of subsection 302-200(1) of the ITAA 1997 in turn. | Detailed Reasoning - Close personal relationship:: Paragraph 302-200(1)(a) of the ITAA 1997 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) Bill 2004 which inserted former section 27AAB of the Income Tax Assessment Act 1936 . This section dealt with interdependency relationships prior to 1 July 2007. 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 (for example 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. The Explanatory Statement (ES) to the Income Tax Amendment Regulations 2005 (No. 7) (the Regulations) which inserted former regulation 8A of the Income Tax Regulations 1936 , stated that the purpose of the Regulations was to specify matters that are, or are not, to be taken into account in determining whether two people have an interdependency relationship. An extract of the ES to the Regulations is as follows: Subregulation 8A(1) lists a number of matters that are to be taken into account when determining whether two people have an interdependency relationship, or whether two people had an interdependency relationship immediately before the death of one of them. … Each of the matters listed is to be given the appropriate weighting under the circumstances. The degree to which any matter is met or is present or not, as the case may be, does not necessarily of its own accord, confirm or preclude the existence of an interdependency relationship. 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. The facts show that you are a child of the deceased and that a close familial relationship existed between you and the deceased prior to, and at the time of, the deceased's death. Further, there is no evidence to suggest that the deceased intended to move out from your home and become independent prior to their death in view of the deceased's: (a) having resided at your home since the death of their spouse; (b) keeping all their belongings at your residence; (c) using your residence as their postal address; and (d) returning to your residence after periods spent overseas. Based on the circumstances outlined above and care you provided the deceased, it is considered that there was a mutual commitment to a shared life by between you and the deceased as required by paragraph 302-200(1)(a) of the ITAA 1997. | Detailed Reasoning - Cohabitation:: Paragraph 302-200(1)(b) of the ITAA 1997 requires that two persons live together. The facts show that for the past number of years, the deceased resided in your home when they were not overseas. You have provided documents that show the deceased had used your home address for their personal mail. Consequently, it is considered that paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied in this instance. | 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 (not necessarily substantial) of financial support is being provided by one person (or each of them) to the other. The facts show that you contributed to the food and living costs of the deceased and provided them with hospital grade bedding and mobility aids. In this instance, it is established that financial support was provided between the persons in the relationship. Consequently, it is considered that paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied. | 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, 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. Prior to the deceased's ill health, you have stated that the deceased provided you with domestic support by doing all the housework and cooking while you were at work. Following the deceased's illness you cared for the deceased by organising their daily meals, doing their personal shopping and driving them to events and doctor appointments. Further you managed the deceased's medications and financial matters along with obtaining equipment to aid the deceased's mobility and taking time off work to take care of the deceased. In view of the above it is considered that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been met. | Detailed Reasoning - Conclusion: On the facts provided, it is considered that all the requirements in subsection 302-200(1) of the ITAA 1997 have been satisfied. Accordingly, you and the deceased were in an interdependency relationship prior to, and up to, the time of their death. As you were in an interdependent relationship with the deceased it follows that you are a death benefits dependant of the deceased within the definition in section 302-195 of the ITAA 1997.