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Ruling
Subject: Dependent spouse tax offset
Question 1:
Are you entitled to claim a dependent spouse tax offset in the 2011-12 financial year?
Answer:
No
This ruling applies for the following periods:
Year ending 30 June 2012
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You married your spouse during the 2012-13 financial year. Your spouse currently lives overseas. You have begun to gather the appropriate documentation for your spouse to apply for immigration to Australia however your spouse has not actually applied to migrate.
You have sent funds to your spouse for his/her maintenance.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 159J(1)
Income Tax Assessment Act 1936 Subsection 159J(3A)
Income Tax Assessment Act 1936 Subsection 6(1)
Reasons for decision
Subsection 159J(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a taxpayer is entitled to a tax offset where, during the year of income, they contributed to the maintenance of a dependent spouse.
In order to be eligible for the tax offset, the following conditions must be satisfied:
· both the taxpayer and their spouse are residents of Australia for tax purposes;
· the taxpayer's adjusted taxable income must be below $150,000 and the spouse's adjusted taxable income must be below $9,702;
· you must have maintained your spouse; and
· you and/or your spouse must not be eligible for Family tax Benefit Part B.
A 'resident of Australia' is defined in subsection 6(1) of the ITAA 1936. However subsection 159J(3A) of the ITAA 1936 provides that in applying the definition of resident in subsection 6(1) of the ITAA 1936 for the purposes of the dependent spouse tax offset the dependent spouse of a taxpayer will be taken to have the same domicile as the taxpayer.
The taxpayer' spouse is therefore deemed to have a domicile in Australia for the purposes of the definition of resident in subsection 6(1) of the ITAA 1936.
Where a person's domicile is in Australia, it is necessary to then consider whether or not the person has a permanent place of abode outside of Australia.
The leading case on permanent place of abode is Applegate v. FC of T 79 ATC 4307; (1979) 9 ATR 899. The Federal Court stated that in respect of the definition of 'resident', a permanent place of abode does not have to be everlasting or forever but it is rather used in contrast to temporary or transitory. Taxation Ruling IT 2650 also considers residency and permanent place of abode outside Australia. Paragraph 12 of IT 2650 states that 'place of abode' refers to a person's residence, where one lives with one's family and sleeps at night. In essence, a person's 'place of abode' is that person's dwelling place of the physical surroundings in which a person lives.
Where a taxpayer's spouse is currently living overseas, their current 'place of abode' is also overseas. However after they have applied to move to Australia, this becomes only a temporary arrangement as the spouse intends to follow the taxpayer to Australia as soon as possible. After the application for immigration has been made, the Commissioner accepts that the taxpayer's spouse does not have a permanent place of abode outside of Australia, and they are considered to be a resident of Australia for tax purposes from that point onwards.
In your case, your spouse has not yet applied for a visa to move to Australia. It is only after the date that this application occurs that your spouse is considered not to have a permanent place of abode outside Australia and is therefore considered a resident of Australia for tax purposes.
As your spouse is not considered a resident of Australia for tax purposes, you are not eligible to claim a dependent spouse tax offset in the 2011-12 financial year.
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