Private ruling: Interdependency
Date of advice: 14 November 2018
Published: February 2019
Ruling period: Income year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Is the Beneficiary a death benefits dependant of the Deceased in accordance with section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997) by virtue of being in an interdependency relationship with the Deceased under section 302-200 of the ITAA 1997 just before they died? | A1: Yes

Relevant facts and circumstances: The Deceased died, aged 18 years. The Beneficiary is a parent of the Deceased. The Deceased was living with the Beneficiary at the time of their death. The Beneficiary did not earn an income. The Deceased provided financial support by contributing to household expenses such as household utilities and other living costs. The Beneficiary provided domestic support and personal care to the Deceased in the following form: ● accompanying the Deceased to medical and dental appointments; ● undertaking routine domestic tasks including ironing, providing meals, grocery shopping; and ● providing the Deceased with significant emotional care and support through highly traumatic and unusual circumstances following the loss of a family member. The Deceased provided the Beneficiary with significant and ongoing emotional support and personal care in the following form: ● providing significant and ongoing emotional care and support through highly traumatic and exceptional circumstances following the death of a family member; ● providing transportation to the Beneficiary to various locations, including the supermarket, appointments and other engagements; and ● undertaking routine domestic tasks such as grocery shopping, laundry, caring for the family animals, undertaking maintenance on the Beneficiary’s vehicle and assisting with the gardening. The Beneficiary has signed a Document provided to the Fund stating that they were in an interdependency relationship with the Deceased at the time of the Deceased’s death. A letter from the Fund states that in the absence of any dependants such as a spouse or children supported by the deceased, the Trustee has used its discretion under the Trust Deed to pay the parents of the Deceased as non-financial dependants. In the 2016-17 income year, a lump sum death benefits payment was paid to the Beneficiary. Subsequent to this, the Beneficiary sent a letter to the Fund requesting they review their decision to pay the Beneficiary as a non-dependant The Fund advised the Beneficiary that as the benefit had been already paid they could not amend their decision but advised the Beneficiary may wish to provide evidence of financial dependency to the Australian Taxation Office and request a review when lodging their tax return.

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

Reasons for decision: Summary: An interdependency relationship as defined under section 302-200 of the ITAA 1997 existed between the Deceased and the Beneficiary just before the Deceased died. Therefore, the Beneficiary is a death benefits dependant of the Deceased as defined in section 302-195 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Subsection 302-195(1) of the ITAA 1997 defines a death benefits dependant of a person who has died as: (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 just before he or she died. *To find definitions of asterisked terms, see the Dictionary, starting at 995-1. As the Beneficiary is a parent of the Deceased, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 do not apply. Therefore, to conclude that the Beneficiary is a death benefits dependant of the Deceased, it must be established that the Beneficiary had an ‘interdependency relationship’ with the Deceased or that they were a ‘dependant’ of the Deceased just before the Deceased died. | Detailed Reasoning - What is an interdependency relationship?: Subsection 302-200(1) of the ITAA 1997 states that two persons (whether or not related by family) have an interdependency relationship 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(3) of the ITAA 1997 provides that matters and circumstances that are, or are not, to be taken into account in determining whether two persons have an interdependency relationship under that section may be specified in the regulations. (a) To that effect, regulation 302-200.01 of the Income Tax Assessment Regulation 1997 (ITAR 1997) states that in considering paragraph 302-200(3)(a) of the ITAA 1997, matters to be taken into account are all relevant circumstances of the relationship between the persons, including (in this case):the duration of the relationship; and (b) the degree of mutual commitment to a shared life; and (c) the degree of emotional support; and (d) the extent to which the relationship is one of mere convenience; and (e) any evidence suggesting that the parties intend the relationship to be permanent. Regulation 302-200.02 of the ITAR 1997 sets out circumstances in which two persons have, or do not have, an interdependency relationship under section 302-200 of the ITAA 1997 and states: 2 persons have an interdependency relationship if: (a) they satisfy the requirements of paragraphs 302-200(1)(a) to (c) of the Act; and (b) 1 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 by a mere friend or flatmate. Examples of care normally provided in a close personal relationship rather than by a friend or flatmate 1. Significant care provided for the other person when he or she is unwell. 2. Significant care provided for the other person when he or she is suffering emotionally. | Detailed Reasoning - Close personal relationship: Generally, a close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not exist between a parent and child. This is because the relationship between a parent and 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) of the ITAA 1997. In this case, it is considered that the relationship between the Beneficiary and the Deceased was over and above that of a normal family relationship and that a close personal relationship existed as required by paragraph 302-200(1)(a) of the ITAA 1997. The matters that indicate that the Beneficiary and the Deceased had a close personal relationship are: ● the Beneficiary and the Deceased lived together until the Deceased death; ● while the parties lived together they provided each other with financial and domestic support and personal care; ● the usual and exception degree of emotional support that the Beneficiary and the Deceased provided each other given the traumatic circumstances following the loss of a family member; ● there is nothing to indicate that the relationship was one of mere convenience; ● the facts indicate that the relationship between the Deceased and the Beneficiary was likely to be permanent and given the reliance on each other in the exceptional circumstances they were in the years prior to the Deceased death; and ● the Beneficiary has provided copies of signed forms that were provided to the Fund to the effect that the Beneficiary and the Deceased were in an interdependency relationship as defined in section 302-200 of the ITAA 1997. | Detailed Reasoning - Living together: At the time of their death, the Deceased was staying with the Beneficiary. Accordingly, paragraph 302-200(1)(b) of the ITAA 1997 is satisfied as the Deceased and the Beneficiary were living together at the time of the Deceased’s death. | Detailed Reasoning - 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. In this case, the facts indicate that the Deceased provided the Beneficiary with financial support by making a significant contribution to the Beneficiary’s household expenses. Therefore, it is considered that the Beneficiary and the Deceased provided financial support to each other as required under paragraph 302-200(1)(c) of the ITAA 1997. | Detailed Reasoning - Domestic support and personal care: 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. From the facts presented, the Beneficiary and the Deceased provided domestic support and personal care to each other an ongoing basis. This consisted of the Beneficiary undertaking routine domestic tasks such as ironing, grocery shopping and providing the Deceased with meals. The Beneficiary also undertook routine domestic tasks such as gardening and caring for the family’s pets. Additionally, the Beneficiary and the Deceased provided one another with personal care in the form of significant emotional support to assist one another through highly traumatic and exceptional circumstances. Based on the above, the Beneficiary meets all the requirements of an interdependency relationship for the purposes of subsection 300-200(1) of the ITAA 1997. Therefore, the Beneficiary is a death benefits dependant of the Deceased for the purposes of section 302-195 of the ITAA 1997. Consequently, it is not necessary to consider whether the Beneficiary is a dependant of the Deceased under paragraph 302-195(d) of the ITAA 1997.