The beneficiary was the only child of the deceased and following a divorce lived with the deceased throughout their schooling in the family home. It was while the beneficiary was attending university that the deceased first became ill. Until then, the beneficiary was financially dependent on the deceased for basic living necessities.

The deceased suffered a sudden brain aneurysm and was left in a vegetative state and the beneficiary provided some care. Initially, the deceased spent time in hospital before being moved into a rehabilitation centre following surgery, then back to hospital.

After the deceased became sick, the beneficiary was appointed as guardian and responsible for making all financial and medical decisions on the deceased's behalf.

For the period relevant to the private ruling, the beneficiary lived between the family home and student accommodation to match. After several medical procedures, it was deemed the deceased would require 24-hour care and consequently moved into a nursing home.

The Commissioner of Taxation heard that the beneficiary looked into selling the family home to purchase a ground-floor dwelling with specific needs to care for the deceased.

When the deceased passed away the beneficiary had completed an NDIS application and had been granted a plan that involved the deceased moving into a new family home with the beneficiary so that they could coordinate and assist in their parent's 24-hour care.

However, the commissioner stated that all requirements to satisfy an interdependency relationship under the definition of section 302-200(2) of the Income Tax Assessment Act 1997 had not been satisfied in this case.

The ruling stated that the definition of death benefits dependant does not stipulate the nature or degree of dependency required to be a dependant of the deceased person in paragraph 302-195(1)(d) of the ITAA 1997. However, it is generally accepted that this paragraph refers to financial dependence.

“The Beneficiary was not financially dependent on the deceased person and therefore, paragraph 302-195(1)(d) of the ITAA 1997 is not applicable,” it said.

Additionally, while the ITAA 1997 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.

“A close personal relationship as specified in subsection 302-200(1) of the ITAA 1997 would not normally exist between a parent and an adult child because there would not be a mutual commitment to a shared life between the two,” the ruling said.

“However, where unusual and exceptional circumstances exist, a relationship between a parent and an adult child may be treated as an interdependency relationship for the purposes of subsection 302-200(1) of the ITAA 1997.”

In this instance, the ruling stated that the relationship between the beneficiary and the deceased was not different from a normal family relationship between a parent and an adult child.

The commissioner said the matters that indicate the beneficiary and the deceased did not have a close personal relationship before the deceased's death are:

a. The beneficiary provided care and support to the deceased throughout their illness, regardless of whether they were living together or separately. The beneficiary provided the deceased with ongoing emotional support. This level of care did not exceed the care and comfort that would usually be provided by a parent to an adult child. They did not have an exceptionally close relationship.

b. The beneficiary and the deceased have not lived together since the deceased became disabled. Due to their disability, the deceased continued to be significantly dependent on the beneficiary for ongoing care and support, for the remainder of the deceased's life. The beneficiary moved out of the family's home. They would not have continued to live together if the deceased were still alive. They did not have a strong mutual commitment to having a shared life.

c. Prior to his mother's illness the beneficiary was partially supported by the deceased when he moved to Newcastle for his studies therefore also had become partially financially independent.

Therefore, a close personal relationship did not exist between the beneficiary and the deceased, and the first requirement specified in paragraph 302-200(2)(a) of the ITAA 1997 had not been satisfied in this case.