Interdependency relationship

This is a concept introduced into the SIS and tax legislation in 2005. It seems to have been introduced as a means of providing tax free payment of super benefits to an individual who was in a marriage like relationship with a deceased member but which did not satisfy the traditional definition of marriage. However the definition extends beyond marriage-like relationships.

The formal definition is set out in s10A & Reg 1.04AAAA of the SIS legislation (and s302-200 and Reg 300-200 of the Tax legislation). An interdependency relationship will exist between two individuals if:

  • they have a close personal relationship;
  • they live together;
  • one or each of them provides the other with financial support; and
  • one or each of them provides the other with domestic support and personal care.

The last two elements will be satisfied even if the financial support/domestic support and personal care is “one way” – either from the parent to the child or from the child to the parent. These conditions would even be satisfied where the parent supplied financial support and the child provided the parent with domestic support or personal care.

Importantly, if the two individuals are not living together due to one or more “specified reasons” (so that the second, third or fourth elements may not be satisfied) then an interdependency relationship will still exist. Another way of expressing the matter is that separation for one or more specified reasons will not terminate the relationship. However, separation for other reasons will terminate the relationship.

Another aspect to the concept of an “interdependency relationship” is that the relationship must exist at the date of death. Consequently, if the relationship terminated before the date of death, then the two individuals will not be in an interdependency relationship.

It should be noted that an interdependency relationship does not exist merely by reason of the parent and child relationship. (If this was the case, every parent would be a dependant of their child.) The parent-child relationship may be the starting point but there must be additional aspects to transform the parent-child relationship into a close personal relationship where they live together (or would do so but for one or more specified reasons).

In determining whether an interdependency relationship exists the trustee must take into account a number of matters specified in the SIS Regulations. Of the 9 matters which are specified only 7 of them are relevant to the parent-child relationship. The following are the relevant matters:

  1. the duration of the relationship;
  2. the ownership, use and acquisition of property;
  3. the degree of commitment to a shared life;
  4. the reputation and public aspects of the relationship;
  5. the degree of emotional support;
  6. whether there is any evidence that suggests the parties intended the relationship to be permanent; and
  7. whether there is any evidence that suggests that the relationship is one of mere convenience.

An interdependency relationship can exist without satisfying all the matters. For example, a parent and child could be in an interdependency relationship even if the relationship was of a short duration. However, when determining whether a parent child relationship is an interdependency relationship, the greater the number of relevant matters which are satisfied the more likely the relationship will constitute an interdependency relationship.

Consequently, from a practical perspective, in arguing that a particular parent-child relationship amounted to an interdependency relationship each of the 7 matters should be addressed and satisfied (except for the seventh matter which should be negated).

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