Private ruling: Death Benefit- Interdependency
Date of advice: 13 March 2018
Published: July 2018
Ruling period: Income year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Was the Taxpayer a death benefits dependant of the deceased as defined in section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: You are the sibling of the Deceased. The Deceased passed away in 20XX. The Deceased resided continuously with you at your house for over ten years. Prior to the Deceased’s death, the Deceased was receiving Centrelink benefits. You have provided documentation in relation to the financial assistance you provided to the Deceased over the years up to their death. You provided the Deceased with domestic and emotional support. You are the nominated beneficiary of a lump sum death benefit to be made from the complying superannuation fund of which the Deceased was a member.

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 | Income Tax Assessment Regulations 1997 Regulation 302-200.02

Reasons for decision: Summary: An interdependency relationship as defined under subsection 302-200(1) of the Income Tax Assessment Act 1997 (ITAA 1997) existed between you and the Deceased as all of the requirements which are set out in the relevant legislation have been satisfied. Accordingly, you are a death benefits dependant of the Deceased. | Detailed Reasoning - Death Benefits Dependant: 1. 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 and whether the amount is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit. 2. 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. 3. 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; 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. 4. As you are the brother of the Deceased, paragraphs 302-195(1)(a) and (b) are not applicable. 5. You believe you were in an interdependency relationship with the Deceased for the purposes of paragraph 302-195(1)(c) of the ITAA 1997. | Detailed Reasoning - Interdependency relationship: 6. 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. 7. 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. 8. Paragraph 302-200(3)(a) of the ITAA 1997 states that the regulations may specify the matters that are, or are not, to be taken into account in determining whether two persons have an interdependency relationship under subsections 302-200(1) and (2) of the ITAA 1997. 9. Subregulation 302-200.01(2) of the Income Tax Assessment Regulations 1997 (ITAR 1997) states the matters to be taken into account 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; and (b) the existence of a statutory declaration signed by 1 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. 10. Paragraph 302-200(3)(b) of the ITAA 1997 states that the regulations may specify the circumstances in which two persons have, or do not have an interdependency relationship under section 302-200 of the ITAA 1997. These are specified in regulation 302-200.02 of the ITAR 1997. 11. 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 1997 must be satisfied for a person to be in an interdependency relationship with another person. It is proposed to deal with each condition in turn. | Detailed Reasoning - Close personal relationship: 12. The first requirement to be met is specified in paragraph 302-200(1)(a) of the ITAA 1997. It states that two persons (whether or not related by family) must have a ‘close personal relationship’. 13. 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 1997. 14. 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 inserted former section 27AAB of the Income Tax Assessment Act 1936 (ITAA 1936). 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 (e.g. 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. 15. In this case, you being the sibling of the Deceased, allowed the Deceased to live with you rent free for over ten year hence it is clear that a close family relationship existed prior to, and at the time of the Deceased's death. 16. In respect of emotional support, it is accepted that you provided a significant degree of support to the Deceased throughout the course of their illness. 17. It is clear that a loving and supportive relationship existed between you and the Deceased. It is considered that overall the relationship between you and the deceased is of the type envisioned by the legislation. 18. Accordingly, the first requirement specified in paragraph 302-200(1)(a) of the ITAA 1997 has been satisfied in this case. | Detailed Reasoning - Cohabitation: 19. The second requirement to be met is specified in paragraph 302-200(1)(b) of the ITAA 1997, and states that two persons live together. 20. Prior to and at the time of the Deceased's death, the Deceased and you were living together, and it was not anticipated that the Deceased would leave the home in the immediate future. 21. Consequently, it is considered that paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied in this instance. | Detailed Reasoning - Financial support: 22. The third requirement to be met is specified in paragraph 302-200(1)(c) of the ITAA 1997, and states that one or each of these two persons provides the other with financial support. 23. Financial support under paragraph 302-200(1)(c) is satisfied if some level of financial support (not necessarily substantial) is being provided by one person (or each of them) to the other. 24. According to statements from you, you provided free shelter, contributed some money from time to time for the Deceased bills and made large contributions into a self-managed super fund for the Deceased. 25. As the Deceased was on Centrelink, you continued to support the Deceased financially, by allowing the Deceased to live rent-free in the family home and paying for meals and utilities. 26. It is clear that you provided the Deceased with financial support during the last years of the Deceased’s life. Consequently, it is considered that paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied in this instance. | Detailed Reasoning - Domestic support and personal care: 27. 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. 28. From the facts presented, you clearly provided domestic support to the Deceased on an ongoing basis. 29. Therefore on the facts provided, it is considered that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied in this instance. | Detailed Reasoning - Application of subsection 302-200(2): 30. Subsection 302-200(2) of the ITAA 1997 ensures that where two people have a close personal relationship, however, because of the physical, intellectual or psychiatric disability of one or both of them, they do not satisfy one or more of the requirements in paragraphs 302-200(1)(b), (c) and (d) of the ITAA 1997, they will still be considered to have an interdependency relationship. 31. As the requirements specified in subsection 302-200(1) have all been satisfied in this instance, consideration of the other conditions is not necessary. 32. Consequently, subsection 302-200(2) of the ITAA 1997 does not apply in this instance. | Detailed Reasoning - Conclusion: 33. As all of the requirements in subsection 302-200(1) of the ITAA 1997 have been satisfied in this case, it is considered that the Deceased and you were in an interdependency relationship in the period prior to, and at the time of, the Deceased’s death. 34. As you are considered to be in an interdependency relationship with the Deceased, you are the death benefits dependent as defined under section 302-195 of the ITAA 1997.