{"id":6275,"date":"2016-06-22T15:40:16","date_gmt":"2016-06-22T05:40:16","guid":{"rendered":"http:\/\/www.dbalawyers.com.au\/?p=6275"},"modified":"2021-04-14T17:40:05","modified_gmt":"2021-04-14T07:40:05","slug":"death-benefits-dependant-can-interdependency-relationship-exist-deceased-child-parent","status":"publish","type":"post","link":"https:\/\/www.dbalawyers.com.au\/audit\/death-benefits-dependant-can-interdependency-relationship-exist-deceased-child-parent\/","title":{"rendered":"Death benefits dependant: Can an interdependency relationship exist between deceased child and parent?"},"content":{"rendered":"
With Bryce Figot, Director<\/em><\/p>\n This article looks at whether a parent and deceased child can be in an interdependency relationship for the purpose of satisfying the definition of death benefits dependant in the Income Tax Assessment Act 1997<\/em> (Cth) (‘ITAA97’). This article follows the AAT decision in TBCL and Commissioner of Taxation (Taxation)<\/em> [2016] AATA 264 (‘TBCL’).<\/p>\n The facts of TBCL were as follows:<\/p>\n Before this matter reached the AAT, the Commissioner ruled that Mr and Mrs TBCL were not death benefits dependants of their son since the information provided in Mr and Mrs TBCL’s ATO private binding ruling application did not satisfy the Commissioner that an interdependency relationship existed. The Commissioner’s ruling was subsequently upheld by the AAT.<\/p>\n The AAT’s comments in this matter are interesting. The AAT did not rule out that Mr and Mrs TBCL were death benefits dependants, but rather, and similar to the Commissioner, determined that Mr and Mrs TBCL’s private binding ruling application did not have the requisite facts needed to satisfy the requirements in the ITAA97 that an interdependency relationship existed. At the conclusion of the decision, the AAT even went as far as to ask that the Commissioner request that Mr and Mrs TBCL make another private binding ruling application.<\/p>\n The AAT’s decision in this matter raises the importance of making sure an ATO private binding ruling application contains specific facts that directly address the requirements under the ITAA97. Additionally and more importantly, the AAT’s decision does not rule out the possibility that a parent can be a death benefits dependant of their deceased child.<\/p>\n The starting point is why would a parent of a deceased child want to be a death benefits dependant? The reason: s 302-60 of the ITAA97, which provides that a superannuation lump sum received as a result of the death of a person of whom the recipient is a death benefits dependant is not assessable income nor is it exempt income.<\/p>\n This means that money paid out by the insurer in the case of TBCL would not be assessable income in the hands of the estate (and therefore indirectly his parents) if they were death benefits dependants.<\/p>\n This leads to the question, who then can be a death benefits dependant? A death benefits dependant is defined under s 302-195(1) of the ITAA97, which provides:<\/p>\n A death benefits dependant, of a person who has died, is:<\/p>\n If we look back at TBCL, the parents, for obvious reasons, would not be the spouse or the child of their son. For whether Mr and Mrs TBCL were dependants of their deceased son for s 302-195(1)(d) of the ITAA97, it is more likely that the deceased son was dependent on his parents and not the other way around. Hence the only clear avenue for Mr and Mrs TBCL to be a death benefits dependant was whether they were in an interdependency relationship with their son.<\/p>\n The definition of \u2018interdependency relationship\u2019 is found under s 302-200 of the ITAA97, which provides:<\/p>\n (1) Two persons (whether or not related by family) have an interdependency relationship under this section if:<\/p>\n Each of these requirements must be satisfied and importantly, must be true just before the death of the deceased person (see s 302-195(1)(c) of the ITAA97 above).<\/p>\n To assist with determining whether there is an interdependency relationship, reg 302-200.01 of the Income Tax Assessment Regulations 1997<\/em> (Cth) (\u2018ITAR97\u2019) provides matters that should be taken into account in determining whether two people are in an interdependency relationship. It says:<\/p>\n In TBCL, the AAT looked at each of the above matters and found that that the facts presented to the Commissioner were not indicative of interdependency relationship. In particular, the AAT considered whether Mr and Mrs TBCL\u2019s intention to convert their garage into a private living space would be captured within the ambit of reg 302-200.01(2)(a)(iii) of the ITAR97. Unfortunately for Mr and Mrs TBCL, the AAT noted that the intention to convert the garage was not within the ambit of the regulations, but rather what is captured is the actual use of the property just before death.<\/p>\n Furthermore, the requirement that the relationship was close personal relationship under s 302-200 of the ITAA97 was not satisfied since the AAT noted at paragraph 37 that:<\/p>\n [Mr and Mrs TBCL\u2019s] reference to \u201clove, care, affection and psychological assistance\u201d does not refer to any facts which provide a basis for any indication that there was such a relationship<\/p>\n Of course, this requirement would be difficult to satisfy as most parent and child relationships would be of love, care and affection. But it should be borne in mind that when the interdependency provisions were drafted, they were drafted with same sex couples in mind. The then Prime Minister, the Hon John Howard MP explained in his Press Conference of 27 May 2004, that:<\/p>\n The change we\u2019re announcing today will provide greater certainty for the payment of superannuation death benefits for those involved in interdependency relationships, including of course members of same sex relationships.<\/p>\n Further, the explanatory statement to the Income Tax Amendment Regulations 2005 (No. 7)<\/em> (Cth) which inserted reg 8A to the then Income Tax Regulations 1936<\/em> (Cth), stated that:<\/p>\n Generally speaking, it is not expected that children will be in an interdependency relationship with their parents.<\/p>\n While the above does make clear where the legislative intent was, it does not rule out the possibility of an interdependency relationship between parent and child.<\/p>\n Finally, the AAT\u2019s comments in regards to domestic support and personal care are important as well. Both domestic and personal care, not one or the other, must have occurred just before death for s 302-200(1)(d) of the ITAA97 to be satisfied. Personal care is the harder test to satisfy since reg 302-200.02 of the ITAR97 requires that \u20181 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\u2019. This is further elaborated by the examples provided in reg 302-200.02(2) of the ITAR97 which refer to \u2018significant care\u2019 when a person is unwell or suffering emotionally. Of course, in TBCL, no facts were presented to suggest that either Mr or Mrs TBCL provided significant personal care to their son in the manner stipulated by the regulations or vice versa.<\/p>\n Yes. The requirements that need to be satisfied will still be the same.<\/p>\n This article has only covered one aspect of who can be a death benefit dependant under s 302-60 of the ITAA97. There are of course other relationships and facts that may assist in establishing an independency relationship between two people, including if one of those people had a disability.<\/p>\n As always, you should seek the opinion of a legal practitioner who practices in SMSF law and can advise whether an interdependency relationship exists.<\/p>\n * * *<\/p>\n This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.<\/p>\n This article looks at whether a parent and deceased child can be in an interdependency relationship for the purpose of satisfying the definition of death benefits dependant in the Income Tax Assessment Act 1997 (Cth) (‘ITAA97’). This article follows the AAT decision in TBCL and Commissioner of Taxation (Taxation) [2016] AATA 264 (‘TBCL’). [read more<\/a>]<\/p>\n","protected":false},"author":22,"featured_media":6280,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[26,95,33,35,37,40,38],"tags":[],"ppma_author":[138],"yoast_head":"\n\n
What is a death benefits dependant?<\/h3>\n
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What is an interdependency relationship?<\/h3>\n
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Can an interdependency relationship exist between adult child and their deceased parent?<\/h3>\n
Conclusion<\/h3>\n