1: Was the beneficiary a death benefits dependant of the deceased person according to section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997), due to being in an interdependency relationship with the deceased under section 302-200 of the ITAA 1997?
: No This ruling applies for the following period Income year ending 30 June 2024. The scheme commences on: 1 July 2023
: We've made this private ruling based on the facts and circumstances set out below. If your facts and circumstances differ from those set out below, this private ruling has no effect, and you can't rely on it. The fact sheet has more information about relying on your private ruling. The Beneficiary is the parent of the Deceased adult. The Deceased died on XX XXX 202X (Date of Death, DOD). The Beneficiary received a death benefit payment from the Deceased's superannuation fund (the Fund) in the amount of $XXX,XXX. The Fund withheld $XX,XXX in tax from the death benefit payment. On XX XXX 202X the Beneficiary applied for a private ruling on whether they were a death benefits dependant of the Deceased, due to being in an interdependency relationship . In support of that application, the following statement was received XX XXX 202X a. The Deceased lived with the Beneficiary for the XX years prior to and at the time of the Deceased's death. b. The Deceased contributed to the household in a financial manner. c. The Deceased paid for the internet at the shared premises.
d. The Deceased and the Beneficiary shared domestic duties in the household; washing, housework, yard work and cooking. e. The Deceased and the Beneficiary supported each other emotionally during the period they lived together through varied life ups and downs. f. The Deceased and the Beneficiary travelled together interstate. g. The Beneficiary was approved for compassionate release of superannuation for funeral costs due to being the only person supporting him and being found to be dependant on each other. The following documentation was provided on XX XXX 202X: h. Bank statements for the Beneficiary, covering the period XX XXX 20XX to XX XXX 20XX, listing the account holder address. i. A Statutory Declaration signed by the Beneficiary and Witnessed by a JP stating that the Beneficiary and the Deceased resided together for 25 years - XX XXX 20XX to XX XXX 20XX and provided financial, domestic and emotional support to each other during this time. j. A XXX Tax Invoice for the billing period XX XXX 20XX to XX XXX 20XX, in the name of the Deceased. The following documentation was provided on XX XXX 20XX
PAYG payment summary - superannuation lump sum for the year ending 30 June 2024, with the following details: i. Payer- XXX Fund ii. Payee- Beneficiary iii. Benefit Type- Non-dependant iv. Date of payment- XX XXX 20XX v. Taxed element- $XX,XXX vi. Untaxed element- $XXX,XXX vii. Tax free component- $XXX viii. Tax withheld- $XX,XXX ATO-held information shows that the Beneficiary and the Deceased resided together (at more than one address) from at least 20XX until the Deceased's death. ATO-held information shows that the Beneficiary was approved for Compassionate Early Release of Super Benefit for the recent passing of a dependant and funeral costs.
: Superannuation Industry (Supervision) Regulations 1994 Subdivision 6.3.1 Income Tax Assessment Act 1997 section 302-60 Income Tax Assessment Act 1997 section 302-145 Income Tax Assessment Act 1997 section 302-195 Income Tax Assessment Act 1997 section 302-200 Income Tax Assessment (1997 Act) Regulations 2021 section 302-200.01 Income Tax Assessment (1997 Act) Regulations 2021 section 302-200.02
: 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 that receives the superannuation death benefit is a dependant of the deceased and whether the amount is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit. A superannuation death benefit is defined in section 307-5 of the ITAA 1997 as: a. A payment to you from a superannuation fund, after another person's death, because the other person was a fund member. A superannuation lump sum is described in section 307-65 of the ITAA 1997 as a superannuation benefit that is not a superannuation income stream, as defined in section 307-70 of the ITAA 1997. The taxable component of a superannuation death benefit paid as a lump sum to a non-dependant beneficiary is assessable income and is taxed under section 302-145 of the ITAA 1997. Where a person who was a dependant of the deceased receives a superannuation death benefit paid as a lump sum, the death benefit is not assessable income and is not exempt income, under section 302-60 of the ITAA 1997.
Subsection 995-1(1) of the ITAA 1997 states that the term 'death benefits dependant' has the meaning given by section 302-195 of the ITAA 1997. Subsection 302-195(1) of the ITAA 1997 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. 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.
To assist in determining whether two people have an interdependency relationship, paragraph 302-200(3)(a) of the ITAA 1997 provides that the regulations may specify the matters that are or are not to be taken into account. Subsection 302-200.01(2) of the Income Tax Assessment (1997 Act) Regulations 2021 (ITAR 2021) states the matters to be taken into account. These matters are all of the circumstances of the relationship between the persons, including (where relevant): a. the duration of the relationship b. whether or not a sexual relationship exists c. the ownership, use and acquisition of property d. the degree of mutual commitment to a shared life e. the care and support of children f. the reputation and public aspects of the relationship g. the degree of emotional support h. the extent to which the relationship is one of mere convenience i. any evidence that the parties intend the relationship to be permanent; and
j. 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. Paragraph 302-200(3)(b) of the ITAA 1997 states that the regulations may specify the circumstances in which two people have, or do not have an interdependency relationship. Section 302-200.02 of the ITAR 2021 sets out the circumstances in which two people have an interdependency relationship. Subsection 302-200.02(2) of the ITAR 2021 provides that an interdependency relationship exists between two people where: a. they satisfy the requirements of paragraphs 302-200(1)(a) to (c) of the ITAA 1997; and b. one or both 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, for example one person provides significant care for the other person when they are unwell or suffering emotionally.
Subsection 302-200.02(5) of the ITAR 2021 states that two persons do not have an interdependency relationship if one of them provides domestic support and personal care to the other: a. under an employment contract or a contract for services; or b. on behalf of another person or organisation such as a government agency, a body corporate or a benevolent or charitable organisation. All of the conditions in subsection 302-200(1) of the ITAA 1997, or alternatively, subsection 302-200(2) of the ITAA 1997, or one of the tests in section 302-200.02 of the ITAR 2021 must be satisfied for a person to be in an interdependency relationship with another person. We deal with each condition in turn, to establish if an interdependency relationship existed. Close personal relationship The first requirement to be met is specified in paragraph 302-200(1)(a) of the ITAA 1997, which states that the two persons (whether or not related by family) must have a close personal relationship. This requirement is common to all of the tests specified in section 302-200 of the ITAA 1997 and section 302-200.02 of the ITAR 2021.
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 states: a. 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. b. Indicators of a close personal relationship may include: i) the duration of the relationship; ii) the degree of mutual commitment to a shared life; iii) the reputation and public aspects of the relationship (such as whether the relationship is publicly acknowledged). The above indicators are not an exclusive list and none of them are required for a close personal relationship to exist. People who share accommodation for convenience (such as flatmates) or people who provide care as part of an employment relationship or on behalf of a charity are not intended to fall within the definition of a close personal relationship.
The Explanatory Statement to the Income Tax Amendment Regulations 2005 (No. 7) stated that generally speaking, it is not expected that children will be in an interdependency relationship with their parents. While this statement does not preclude a child from being in an interdependency relationship with a parent, it suggests that interdependency only exists where the relationship goes beyond the usual relationship between an adult child and a parent. In this case, the Beneficiary has provided a statutory declaration stating she and the Deceased supported each other emotionally during the period they lived together. They had been living together since the Deceased was born. However, there is no evidence to show that they have a mutual commitment to a shared life, and the reputational and public aspects of their relationship. Their relationship was not over and above a normal family relationship between a parent and an adult child. The Deceased was aged XX when he died and for the first 18 years would have been a child under the age of 18 and a dependant of the Beneficiary.
While the Beneficiary was approved for compassionate release of superannuation under regulation 6.19A(1)(e)(iii) of the SISR, this does not in itself establish an interdependency relationship under subsection 302-195(1) of the ITAA 1997. A parent may be interdependent with their child if the 4 criteria under the subsection are met. The available information does not support that a close relationship existed at the time of death as per paragraph 302-200(1)(a) of the ITAA 1997. Therefore, the first requirement has not been satisfied in this case. Living together The second requirement to be met is specified in paragraph 302-200(1)(b) of the ITAA 1997 and states that two interdependent persons (whether or not related by family) live together.
The term 'live' is not defined in the ITAA 1997 or accompanying regulations. According to the Macquarie Dictionary, the term 'live' means to dwell or reside. The term 'reside' is defined as the action of dwelling in a particular place permanently or for a considerable time. In the context of paragraph 302-200(1)(b) of the ITAA 1997, the living arrangements must have some degree of permanency that is only disturbed by the death of one of the persons. Documentary evidence and ATO-held data (referenced under 'Relevant facts and circumstances') confirm that the Beneficiary and the Deceased lived together from 20XX until the Deceased's passing. Consequently, the requirement specified in paragraph 302-200(1)(b) of the ITAA 1997 has been satisfied in this case. Financial support The third requirement to be met is specified in paragraph 302-200(1)(c) of the ITAA 1997, which 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.
The Beneficiary's bank statements dated XX XXX 20XX to XX XXX 20XX ('the relevant period') provides evidence of transfers from the Deceased totalling $X,XXX during the relevant period. The same bank statements show transfers totalling $XXX paid by the Beneficiary to the Deceased during the relevant period. The Beneficiary's bank statements reflect payments for essential expenses including some food, streaming services, medical expenses as well as personal expenses. A significant number of transactions were XXX and XXX instalment payments with no information of the type of expenditure. There were also regular payments made to XXX. The evidence shows the Beneficiary and the Deceased provided each other with some financial support during the final year of the Deceased's life. Consequently, paragraph 302-200(1)(c) of the ITAA 1997 has been satisfied. Domestic support and personal care The fourth requirement to be met is specified in paragraph 302-200(1)(d) of the ITAA 1997, which 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:
a. 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 information provided, the Beneficiary and the Deceased provided each other with assistance by sharing the domestic chores in the household including washing, housework, yard work and cooking and emotional support. Therefore, the requirement in paragraph 302-200(1)(d) of the ITAA 1997 has been satisfied. Conclusion As all of the requirements in section 302-200 of the ITAA 1997 have not been satisfied, the Deceased and Beneficiary were not in an interdependency relationship in the period just before the Deceased's death. As the Beneficiary was not in an interdependency relationship with the Deceased, the Beneficiary is not a death benefits dependant as defined under section 302-195 of the ITAA 1997.