Private ruling: Death benefits dependant
Date of advice: 19 October 2018
Published: December 2018
Ruling period: Income year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

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

Relevant facts and circumstances: The Deceased always lived at home with the parents. The Deceased moved out of the family home and rented an apartment for a period of time. In 20XX the Deceased was diagnosed with an aggressive illness. The Deceased moved back to the parent’s home so the parents could assist the Deceased. This assistance included: ● driving to and from hospital for fortnightly treatments and treatment for infections contracted; ● cooking meals, laundry, cleaning and shopping; ● administering medication; washing and dressing, feeding, assisting with walking, and moving between chairs etc; ● providing emotional support; and ● providing financial assistance including the payment of all the utility and household expenses, as well as medical and pharmaceutical expenses. In mid 20XX the Deceased was hospitalised for several weeks. In late 20XX the Deceased was discharged from hospital so as to receive palliative care at home. In the 20XX-XX income year the Deceased passed away. The Deceased had no spouse or children. The Deceased was a member of the Fund. In the 20XX-XX income year the trustee of the Fund paid a death benefit to the Deceased’s estate.

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 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 the parents just before the Deceased died. Therefore, in relation to the death benefit paid to the estate of the Deceased, the Deceased’s parents are considered death benefits dependants of the Deceased 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 the parents 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 the parents 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 the parents had a close personal relationship are: ● the Deceased lived with the parents for most of the Deceased’s life, except for the brief period of time; ● significant personal, financial and emotional support was provided to the Deceased by the parents; and ● the Deceased had no spouse or children. | 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 the parents were living together at the time of the Deceased’s death. Therefore the requirement specified in 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, the Deceased was being supported financially by the parents when the Deceased moved back home. The parents paid for all the utility and household expenses, as well as some of the Deceased’s medical and pharmaceutical expenses. The Deceased did not pay board or rent whilst living at home. 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, the Deceased’s parents drove the Deceased to hospital appointments and treatment sessions. When at home, the Deceased’s parents provided the Deceased with significant emotional support, as well as assistance with feeding, doing laundry, assisting with medication, personal hygiene and assistance with the Deceased’s mobility. During the periods the Deceased was hospitalised, the parents provided significant emotional support. It is considered that the requirement in paragraph 302-200(1)(d) has been satisfied in this instance. | Detailed Reasoning - Conclusion: The Deceased and the parents had an interdependency relationship within the meaning of subsection 302-200(1).