Private ruling: Superannuation death benefit - interdependency
Date of advice: 20 December 2019
Published: March 2020
Ruling period: 1 July 2015 to 30 June 2020
Date scheme commenced: January 2016

Ruling: Q1: Are you a death benefits dependent in accordance with section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: · The Deceased died in January 201X, after a 22 month battle with a serious illness. · You are the parent of the Deceased and a beneficiary. · The Deceased's superannuation benefits were paid as a death benefit. · You and two others have provided statutory declarations detailing your relationship with the deceased. · You bought a house with the deceased under their name, for which you paid the mortgage payments from your wages. The Deceased contributed to the day to day living expenses. You also had a shared bank account. · You lived together through the entire period of the Deceased's illness. · From working part time you reduced your work to three days and then two days per week. You then took leave without pay to provide adequate care for the Deceased's increasing needs. · You provided the following support for the Deceased: · Accompanied them to counselling and multiple medical appointments · Accompanied them to treatment · Prepared them for modified diet and food · Washed clothing, cleaning and house work · Took long walks together to improve health · Travelled with them to many overseas religious sites to seek spiritual strength

Relevant legislative provisions: Income Tax Assessment Act 1997 section 302-60 | Income Tax Assessment Act 1997 section 302-195 | Income Tax Assessment Act 1997 section 302-200 | Income Tax Assessment Act 1997 section 307-5 | Income Tax Assessment Regulations 1997 regulation 302-200.01 | Income Tax Assessment Regulations 1997 regulation 302-200.02 Other relevant documents | Explanatory Statement to the Income Tax Amendment Regulations 2005 (No 7) | Supplementary Explanatory Memorandum to the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004

Reasons for decision: Detailed Reasoning - Death benefit interdependency: Subsection 307-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines a superannuation death benefit as 'A payment to you from a superannuation fund, after another person's death, because the other person was a fund member'. Section 302-60 of the ITAA 1997 states: A superannuation lump sum that you receive because of the death of a person of whom you are death benefits dependent is not assessable income and is not exempt income. 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. As the Deceased was your adult child, paragraphs 302-195(1)(a) and (b) of the ITAA 1997 are not applicable in this case. Therefore, it must be established that you, as the beneficiary, were in an 'interdependency relationship' with the Deceased under paragraph 302-195(1)(c) of the ITAA 1997, or that you were a 'dependant' of the Deceased as per paragraph 302-195(1)(d). | Detailed Reasoning - Interdependency relationship: Section 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. Furthermore, two people who have a close personal relationship but who cannot satisfy all of the other requirements of an interdependency relationship because of a physical, intellectual or psychiatric disability, can still have an interdependency relationship (subsection 302-200(2)). Subsection 302-200(3) of the ITAA 1997 provides the matters and circumstances which are to be considered in determining whether an interdependency relationship exists between two persons under that section may be specified in the regulations. Regulation 302-200.01 of the Income Tax Assessment Regulations 1997 (ITAR 1997) sets out the matters that are to be taken into account in determining whether two persons have an interdependency relationship. The matters are all of the circumstances of the relationship between the persons, including (relevant to your case): · the duration of the relationship; and · the ownership, use and acquisition of property; and · the degree of mutual commitment to a shared life; and · the degree of emotional support; and · the extent to which the relationship is one of mere convenience, and · the existence of a statutory declaration signed by one 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 Regulation 302-200.02 of the ITAR 1997 sets out the circumstances in which two persons have, or do not have, an interdependency relationship under section 302-200 of the ITAA 1997 and provides that interdependency relationship exists where: · two persons satisfy the requirements of paragraphs 302-200(1)(a) to (c) 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 by a friend or flatmate (for example, significant care provided for the other person when they are unwell or suffering emotionally). · two persons have a close personal relationship and they do not satisfy the other requirements set out in subsection 302-200(1) because they are temporarily living apart, for example, one of the persons is temporarily working overseas. · two persons have a close personal relationship and they do not satisfy the other requirements set out in subsection 302-200(1) because either or both of them suffer from a disability. Explanatory Statement to the Income Tax Amendment Regulations 2005 (No 7) which introduced regulations that specified matters that are, or are not, to be taken into account in determining whether two people have an interdependency relationship for the purposes of former section 27AAB of the Income Tax Assessment Act 1936 (ITAA 1936) - the immediate predecessor of section 302-200 of the ITAA 1997 - states: It is not necessary for each of the listed circumstances to be satisfied in order for an interdependency relationship to exist. There are circumstances in which it would be inappropriate to consider certain matters. For example, it would not be relevant to consider whether there was a sexual relationship when determining whether an interdependency relationship existed between siblings. Each of the matters listed is to be given the appropriate weighting under the circumstances. The degree to which any matter is met or is present or not, as the case may be, does not necessarily of its own accord, confirm or preclude the existence of an interdependency relationship. Generally speaking, it is not expected that children will be in an interdependency relationship with their parents. C lose personal relationship The expression 'close personal relationship' is not defined in the ITAA 1997 or ITAR 1997. The Supplementary Explanatory Memorandum (SEM) to the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004 which inserted former section 27AAB of the ITAA 1936 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. In general, a close personal relationship would not exist between parents and children under subsection 302-200(1) of the ITAA 1997. While it is convenient that young adults will live with their parents and be supported financially, domestically and emotionally, it is generally expected that they will establish their independence and eventually move out of the parental home. However, where unusual and exception circumstances exist, a relationship between parent and an adult child may be treated as an interdependency relationship. You have stated that a close familial relationship existed between you and the Deceased at the time of death that was over and above a normal relationship between a parent and adult child. This was demonstrated through ongoing financial and personal support provided to the Deceased during her life and in particular medical and emotional support during her sickness over the final 22 months of their life. Due to the medical issues of the Deceased you took long walks together to improve their health and travelled with them to many overseas religious sites to seek spiritual strength. This is further evidence of a demonstrated and ongoing commitment to the emotional support and well-being of the Deceased. Therefore, it is concluded that the close personal relationship requirement under paragraph 302-200(1)(a) of the ITAA 1997 has been satisfied. | Detailed Reasoning - Living together: The second requirement for an interdependency relationship is specified in paragraph 302-200(1)(b) of the ITAA 1997, and requires that two parties live together. You bought a house with the Deceased under her name and you paid the mortgage. At the least you lived together during this period and all times during the last 22 months of their life. Consequently, paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied. | 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 of financial support (not necessarily substantial) is being provided by one person (or each of them) to the other. You provided the Deceased with a degree of financial support during the course of your relationship. This included the mortgage payments on her house. You also had a shared bank account. The Deceased contributed to the day to day living expenses. Subsequently, paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied. | Detailed Reasoning - 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. You provided the Deceased with significant assistance, including clothes washing household cleaning and preparing food for their specialised diet. You provided the Deceased with significant assistance during her illness which required you to reduce your work to three days and then two days per week. You then took leave without pay to provide adequate care for their increasing needs. This was a result of the treatment which affected their diet and movement. Therefore, it is considered that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied. | Detailed Reasoning - Conclusion: As all of the requirements in subsection 302-200(1) of the ITAA 1997 have been satisfied, it is concluded that you and the Deceased were in an interdependency relationship in the period prior to, and at the time of death. Therefore, you are a death benefits dependant in accordance with section 302-195 ITAA 97.