Private ruling: Death benefit payment for interdependency
Published: June 2013
Ruling period: For the year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Was your client in an interdependency relationship with the deceased in accordance with section 302-200 of the ITAA 1997? | A1: No.

Relevant facts and circumstances: The Deceased passed away in the last quarter of 20XX. The Deceased is the child of your client (the Father) and the Mother. The Deceased resided on a full time basis with their parents (your client and the Mother) and brother. The Deceased resided at this address for approximately six months preceding their death. The Deceased was attending university as a full time student and commenced studying there in 20YY. The Deceased was provided free accommodation and rental by your client and the Mother, including the provision of food, assistance for car and health insurance, and ambulance membership. The Deceased did not provide your client with financial support during their studies due to insufficient earnings and was receiving Government benefits. Your client did not provide personal care to 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 Subsection 995-1(1).

Reasons for decision: Summary: Your client was not in an interdependency relationship with the Deceased at the time of her death. | Detailed Reasoning - Detailed reasoning: Interdependency relationship Under section 302-200 of the ITAA 1997 two persons (whether or not related by family) have an 'interdependency relationship' if: (a) they have a close personal relationship; and (b) they lived 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. 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. 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 . 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 (for example 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 former regulation 8A of the ITR 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. In this case, your client and the Deceased were a parent and child and obviously had a close familial relationship. The Deceased was residing at home while studying at university. However the Deceased would have eventually become independent from the father. Therefore the situation is such that there is nothing decisively different from the situation the Deceased was in with their father and one where a young adult child may be living at home while working. In this case it is considered that the relationship between your client and the Deceased was one that a person would expect between a parent and their adult child, but it was not a close personal relationship for the purposes of paragraph 302-200 (1)(a) of the ITAA 1997. Cohabitation: 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. The facts show that the Deceased was living with your client at the time of their death. Therefore the requirement specified in paragraph 302-200(1)(b) has been satisfied in this instance. 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) is satisfied if some level (not necessarily substantial) of financial support is being provided by one person (or each of them) to the other. Your client provided the Deceased with major living expenses such as free accommodation and food. Furthermore insurance expenses such as car and health were also assisted by your client. Consequently, it is considered that paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied in this instance. 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 is also discussed in the case 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… There is also an expectation, in ordinary circumstances, that parents would provide a substantial amount of care to their children. From the facts of the case, notwithstanding a degree of emotional support provided by your client to support the deceased through their tertiary studies, there was no evidence of domestic support, and as the deceased was in good health, no personal care was required. On this point, there has been no evidence of any personal care provided. Therefore, it is considered that the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has not been satisfied in this instance. As your client has not satisfied all the requirements in section 302-200 of the ITAA 1997, they are not considered to be in an interdependency relationship with the Deceased at the time of the Deceased's death