Private ruling: Death benefit - interdependency
Published: April 2015
Ruling period: The year ended 30 June 2015.
Date scheme commenced: 1 July 2014.

Ruling: Q1: Was the deceased and their parent in an interdependency relationship? | A1: Yes. | Q2: Was the deceased and their other parent in an interdependency relationship? | A2: Yes.

Relevant facts and circumstances: The Deceased died prior to the relevant income year. The Deceased's parents are the executors and trustees for the estate of their adult child. When the Deceased was a young child, they were diagnosed with a rare medical condition. Following treatment they went into remission. Some time later, whilst the Deceased was living away from home, testing revealed that the medical condition had re-occurred. Due to the location the medical condition it was inoperable and the diagnosis made was that the Deceased was terminal. The Deceased was given less than 2 years to live. Because of the Deceased's illness, they returned to live with their parents. Despite their illness, the Deceased chose to move to another city and live with another family member, whilst working. The Deceased then finished work and returned to live with their parents again as their symptoms started to progress. Apart from the X week period living away from home, the Deceased resided in the family home with their parents for nearly 2 years till their date of death. As time went on the Deceased became increasingly unwell and needed physical support with attending doctor's appointments, hospital visits and for activities of daily living. Towards the end of the Deceased's life, their shortness of breath became so severe that they needed continuous home oxygen and was essentially bedridden. Apart from their period of work for X weeks, the Deceased had been in receipt of a disability support pension. It allowed the Deceased to contribute to household expenses such as groceries and petrol. To assist with the Deceased's costs of living their parents also provided the Deceased with financial assistance, including paying for their private health insurance, phone bills and other living expenses. The Deceased's parents provided their adult child with the following domestic support: • managing the Deceased's medications; • accompanying the Deceased to medical appointments and treatment, including overnight stays in other cities; and • assisting with cooking, ironing and washing. The Deceased's parents provided their adult child with the following personal care: • walking the Deceased to the bathroom; • ensuring the Deceased was comfortable in bed; • helping the Deceased eat and drink; • providing mouth and skin care; and • psychological support to help the Deceased cope with their diagnosis. In addition, the Deceased's parent provided their adult child with personal care in the form of assistance with showering, hair care and dressing. The Deceased received support from the palliative care team, their parents and another family member until they passed away in the family home. Two superannuation lump sum death benefits were paid to the estate of the Deceased.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 302-195. | 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(2)(a). | Income Tax Assessment Act 1997 paragraph 302-200(2)(b). | Income Tax Assessment Act 1997 paragraph 302-200(2)(c). | Income Tax Regulations 1997 Regulation subregulation 302-200.01(2).

Reasons for decision: Summary: It is considered that the Deceased's parents did have an interdependency relationship as defined under section 302-200 of the Income Tax Assessment Act 1997 (ITAA 1997) with their adult child. Accordingly, the Deceased's parents are death benefits dependants of the Deceased. | Detailed Reasoning - Detailed reasoning: 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 who receives the superannuation death benefit is a dependant of the deceased or not and whether the amount is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit. 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. 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 persons spouse or former spouse; or (b) the deceased persons 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 the Deceased's parents cannot qualify under paragraphs (a), (b) or (d) of the above definition, paragraph (c) of section 302-195 of the ITAA 1997 needs to be examined. | Detailed Reasoning - Interdependency relationship: Paragraph (c) of the definition of 'death benefits dependant' in section 300-195 of the ITAA 1997 refers to the term 'interdependency relationship'. Under subsection 302-200(1) of the ITAA 1997 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) 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. Accordingly, 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. 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 the matters that are, or are not, to be taken into account. In addition, 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 subsections 302-200(1) and (2). For the purposes of paragraph 302-200(3)(a) of the ITAA 1997, subregulation 302-200.01(2) of the Income Tax Assessment Regulations 1997 (ITAR 1997) sets out the matters to be taken into account in determining whether two persons have an interdependency relationship. These matters include 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, … It is proposed to deal with each condition of subsection 302-200(1) of the ITAA 1997 in turn. | Detailed Reasoning - Close personal relationship:: 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. In discussing the meaning of 'close personal relationship, a detailed explanation is set out in the Supplementary Explanatory Memorandum (SEM) to the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004. 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. In the Explanatory Statement to the Income Tax Amendment Regulations 2005 ( No.7) which inserted regulation 8A of the Income Tax Regulations 1936 , it stated that: 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. In addition, the relationship between parents and their adult children would be expected to change significantly over time. It would be expected that the adult child would eventually move out and secure independence from their parents. Clearly a familial relationship existed between the Deceased and their parents prior to, and at the time of, the Deceased's death. Given that the Deceased was an adult child at the time of death, the Deceased and their parents had of course known each other for some time. In this case the Deceased suffered from a terminal medical condition. As a result, the Deceased required constant care. The Deceased's parents would arrange to take the Deceased to medical appointments, ensure the Deceased took their medication and also assisted with ensuring they were comfortable as required. The facts of this case show that the relationship between the Deceased and their parents was over and above that of a normal family relationship for an adult child and a parent. There is evidence of a mutual commitment to a shared life between the Deceased and their parents prior to and at the time of the Deceased's death. Therefore, it is accepted that a close personal relationship existed between the Deceased and their parents as envisaged by paragraph 302-200(1)(a) of the ITAA 1997. | Detailed Reasoning - Cohabitation:: The second requirement to be met is specified in paragraph 302-200(1)(b) of the ITAA 1997 and states the two persons live together. The facts show that the Deceased lived with their parents for approximately 2 years, apart from an X week period when they was living with another family member. Given the duration of time spent living at home with their parents, the requirement under paragraph 302-200(1)(b) of the ITAA 1997 has been met. | Detailed Reasoning - Financial support:: 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. 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. It is clear from the facts presented that the Deceased's parents provided the Deceased with financial assistance including paying for their phone bill, private health insurance and other living expenses. In return the Deceased contributed to household expenses where possible. In this instance, the existence of financial assistance is established and it is not necessary to look at the level of financial support provided, but merely to establish that such support existed. Therefore the requirement specified in paragraph 302-200(1)(c) of the ITAA 1997 has been met. | 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. The term 'personal care' was also discussed in the New South Wales Supreme Court in Dridi v. Fillmore [2001] NSWSC 319. Master Macready stated, in regards to the term 'domestic support and personal care', that: The expression [personal care] seems to be directed to a different level of reality such as assistance with mobility, personal hygiene and physical comfort. Such activities obviously however will include an element of emotional support. From the facts provided the Deceased's parents managed their medications, accompanied the Deceased to medical appointments, assisted with cooking, ironing and washing. The Deceased's parents also provided personal care in the form of walking the Deceased to the bathroom, ensuring their comfort, assistance with eating and providing psychological support. In addition, the Deceased's parent provided personal care in the form of assistance with showering, hair care and dressing. Due the Deceased's health issues, the domestic support and personal care services that the parents provided are above that expected in an ordinary familial relationship. 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 - Conclusion: As all conditions have been satisfied by both the Deceased's parents, it is accepted that the Deceased and their parents had an interdependency relationship. Therefore, in the period prior to and at the time of the Deceased's death their parents are considered to be a dependant of the Deceased for the purposes of subsection 302-200(1) of the ITAA 1997.