Interdependency & the ATO: A tale of two views

26 August 2026

Can an adult child and a parent be in an interdependency relationship?  In the view of the ATO it seems highly unlikely as the ATO considers that an adult child and a parent cannot satisfy the “close personal relationship” requirement of an “interdependency relationship”.  The ATO seems to identify a “close personal relationship” as being equivalent to a mutual commitment to having a shared life above and beyond that of a parent/child relationship. But is the ATO’s view supported by the relevant legislation?

The term “interdependency relationship” is defined in section 302-200 of the Income Tax Assessment Act 1997.  The term, when used in the Superannuation Industry (Supervision) Act 1993 has an identical definition.  The Tax Act determines the taxation treatment of a death benefit while the SIS Act determines whether the death benefit can be paid as an income stream.

Legislative history

The term “interdependency relationship” was introduced by the Superannuation Legislation Amendment (Choice of Superannaution Funds) Act 2004 (No 102/2024).  The term was originally introduced into the 1936 Tax Act (as s27AAB) and when the superannuation provisions were transferred to the 1997 Act, became s302-100.  There have been no material amendments to the term since 2004. 

Income Tax Amendment Regulations 2005 (No 7) amended the Income Tax Regulations by introducing Regulation 8A which provides a shopping list of matters which should be taken into account (where relevant) to determine the existence of an “interdependency relationship”.  Following the relocation of the superannuation provisions from the 1936 Act to the 1997 Act, Regulation 8A was enacted (without material alternation) as Regulation 302-200.1 of the Income Tax Assessment (1997 Act) Regulations.

The definition contains four requirements.  Each requirement must be satisfied for an interdependency relationship to exist.  The four requirements are:

  • Domestic Support and Personal Care
  • Financial support
  • Living together
  • Close personal relationship

Each of these requirements will be considered using the situation of an adult child providing care to a parent.

Domestic Support and Personal Care

The “domestic support” element of this requirement will be satisfied if the adult child provides both domestic support and personal care to the parent.  Domestic support covers such matters as household cleaning, clothes washing and ironing/folding, household shopping, food preparation and attending to household finances.

The “personal care” element of this requirement will be satisfied if the adult child provides the parent with assistance with mobility, dressing, personal hygiene, supervision of medications, and escorting the parent to medical/hospital appointments.

For the requirement to be satisfied each of the elements must be satisfied.

To establish that this requirement has been satisfied, the adult child will typically need to provide a detailed description of the domestic support and personal care they have provided on a regular and constant basis.  The detailed description of the support and care provided should be itemised on a daily or weekly basis. The support and care must be provided personally by the adult child rather than being outsourced. 

Financial Support

The requirement will be satisfied if either the adult child provides financial support to the parent or if the parent provides financial support to the adult child.  Financial support is much less stringent a requirement than financial dependency. 

The financial support need not be substantial, but it should be regular in nature and over an extended period.  Additionally, as evidence of financial support is amendable to documentary proof, documentary support should be provided by proof of payment of various expenses, household or personal expenses or bank transfers.

Living Together

This requirement will be satisfied if the adult child and parent share the same residence and the sharing is undertaken to enable the adult child to provide domestic support and personal care to the parent. 

Sharing of the same residence for other purposes (such as permitting savings for the adult child or loss of accommodation by the adult child) would not satisfy this requirement.

Also, merely sharing the same residential block (adult child in the main house and the parent in a separate granny flat) would most likely not satisfy the requirement.

Close Personal Relationship

This requirement is usually the most difficult to satisfy in a adult child/parent situation.  The difficulty is twofold.  First, the expression has no precise or generally accepted content.  Secondly, the difficulty of direct proof and the consequent reliance of inferences from the conduct of the adult child and parent.

The explanatory memorandum to the legislation, which originally introduced the term “interdependency relationship”, describes a “close personal relationship” as one “that involves a demonstrated and ongoing commitment to the emotional support and well-being of the two parties” and that the indicators of a close personal relationship may include “(i) the duration of the relationship; (ii) the degree of mutual commitment to a shared life; and (iii) the reputation and public aspects of the relationship (such as whether the relationship is publicly acknowledged”.  Significantly, the explanatory memorandum provides that “the above indicators are not an exclusive list and none of them are required for a close personal relationship to exist”.

The explanatory statement for the regulations which introduced the predecessor to regulation 302-200.01 stated that “Generally speaking, it is not expected that children will be in an interdependency relationship with their parents.”

While the concept of “interdependency relationship” was clearly introduced in 2004 to cover same sex relationships where the relationship was marriage like (shared residence and mutual commitment to a shared life of indefinite duration which could be terminated by either party) as shown in items (ii) (shared life) and (iii) (reputational aspects) above, the concept has a broader application. 

The broader application is clearly evidenced by the express statement that the three marriage like indicators are not an exclusive list and that none are required for a close personal relationship to exist.

Further, the shopping list of factors (many of which are plainly features of marriage like relationships) are to be taken into account, but only where relevant.  Finally, the expressed recognition that a child/parent relationship could constitute an interdependency relationship (albeit the relationship would be exceptional in nature) clearly shows the concept is not limited to marriage like relationships.

In many Private Binding Rules on whether an adult child and their parent are in an interdependency relationship, the “close personal relationship” requirement is held to be not satisfied because there was no mutual commitment to having a shared life above and beyond that of a parent/child relationship.  (see PBR references numbers at the end).

With respect, as the expression goes, there seems to be an established view of the ATO that for a “close personal relationship” to exist there must be a marriage like relationship.  If there is a marriage like relationship between two individuals, then it can usually be inferred that a close personal relationship will exist.  However, the issue is not whether a marriage like relationship exists, but whether the relationship which exists between the two parties is a close personal relationship. 

If a relationship between an adult child and the parent satisfies the “living together” and the “domestic support and personal care” requirements, then this would take the relationship beyond the normal adult child/parent relationship.  Further, if the adult child has significantly altered his or her life (relocated residences, put their employment or career or personal life on hold) to care for the parent, this would clearly establish a close and personal relationship given the personal cost to and sacrifice borne by the adult child.  While the relationship will be terminated upon the death of the parent and so, the relationship is not of an indefinite duration or even of a long duration, while the relationship exists it will be of an exception nature.

In short, it seems that the ATO has not been focusing on the primary issue of whether the relationship between the adult child and the parent is one which is a “close personal relationship” but whether that relationship exhibits a “strong commitment to a shared life”.

Private Binding Rulings 1052473760756; 105250058144704; 1052509195315

 

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