Private ruling: Superannuation death benefit
Date of advice: 17 June 2021
Published: August 2021
Ruling period: Income year ended 30 June 2022
Date scheme commenced: 1 July 2019

Ruling: Q1: Did an interdependency relationship exist between the Deceased and your client under section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: Your client is the child of the Deceased. From March 201X, the Deceased intermittently lived between your client's residence, and the Deceased's own home. In May 201X, the Deceased suffered from medical issues. Due to this, the Deceased was hospitalised twice for several months during the 201X-1Y income year. The Deceased came to live with your client on a permanent basis in 201Y, until the Deceased's passing in 20XX. The Deceased and your client shared a close personal relationship. Your client took the Deceased out for lunch on a weekly basis and brought the Deceased's favourite food preference on a regular basis. The Deceased and your client travelled on holidays with each other, with your client preparing luggage and organising the holiday; your client paid for these holidays. They also both provided each other with friendship, and the Deceased often provided your client with advice. During the time they lived together, your client provided financial and domestic support for the Deceased. This support included: • purchasing groceries on a daily basis for the Deceased, as well as purchasing clothing for the Deceased. The Deceased would contribute to the grocery costs wherever possible. • paying all household utility bills. • preparing meals for the Deceased. • modifying the household at your client's expense to accommodate the Deceased: • refurbishing a room intended to be the Deceased's bedroom; • installing a shower for the Deceased's use; • installing hand rails to ease the Deceased's mobility; and, • installing a landline for the Deceased to communicate with their friends and family. The Deceased passed away in the 201X-XX income year. The Deceased was a member of the Fund. The Fund paid a death benefit to the Deceased's estate. No tax was withheld by the Fund from the death benefit. Your client is the executor and trustee of the Deceased's estate. Your client has signed a Statutory Declaration stating that they were in an interdependent relationship with the Deceased at the time of the Deceased's passing, and that all information provided is true and correct.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 302-10 | Income Tax Assessment Act 1997 Subsection 302-195(1) | Income Tax Assessment Act 1997 Paragraph 302-195(1)(c) | 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 Paragraph 302-200(3)(a) | Income Tax Assessment Regulations 1997 Subregulation 302-200.01(2) | 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 as defined under subsection 302-200(1) existed between the Deceased and your client just before the Deceased died. Therefore, in relation to the death benefit paid to the estate of the Deceased, the Deceased is a death benefits dependant of your client as defined in subsection 302-195(1). | Detailed Reasoning - Superannuation death benefits paid to the trustee of a deceased estate: A payment made by a superannuation fund to a deceased estate after the death of the deceased is assessed as a death benefit under section 302-10. The taxation arrangements that apply to this superannuation death benefit are determined in accordance with the taxation arrangements that would otherwise apply to the person or persons otherwise intended to benefit from the estate. For example, where a dependant of the deceased receives part, or all of, a superannuation death benefit and has benefited, or is expected to benefit, the trustee will not be subject to tax on that part of the benefit paid to the dependant as if it were paid to a dependant of the deceased. | Detailed Reasoning - Death benefits dependant: 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. In this case, the facts show that for the purposes of subsection 302-195(1) the relevant provision that needs to be satisfied is paragraph 302-195(1)(c). That is, an interdependency relationship needs to be established between the Deceased and your client just before the Deceased passed away. | Detailed Reasoning - Interdependency relationship: Under subsection 302-200(1) 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) 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. Accordingly, 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. Relevantly in this case, focus will be on whether an interdependency relationship existed with another person(s) under subsection 302-200(1). 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. | Detailed Reasoning - Close personal relationship: The first requirement to be met is 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) of the ITAA 1997 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 the Deceased and your client 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 the Deceased and your client had a close personal relationship are: • the Deceased lived with their parent for XX years; • significant personal and emotional support provided to the Deceased by their parent during the time the Deceased suffered from a serious illness; and • the fact that the Deceased had no dependants. | 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 the Deceased and your client were living together at the time of the Deceased's death and accordingly 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, during the time that the Deceased and your client cohabited, your client paid for the majority of the cost of living expenses, utilities, as well as general financial support as required. 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 made significant modifications to their residence to accommodate the Deceased's mobility and living standard. Your client also cooked for the Deceased on a regular basis. It is considered that the requirement in paragraph 302-200(1)(d) has been satisfied in this instance. | Detailed Reasoning - Conclusion: The Deceased and your client had an interdependency relationship within the meaning of subsection 302-200(1).