Edited version of private ruling

Authorisation Number: 1011887592340

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Ruling

Subject: Dependant tax offset

Question and answer:

Are you entitled to claim the dependant parent offset in your 2011 income tax return?

Yes.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

Your mother came to Australia from Country X in 2010 and stayed for most of the income year ended 30 June 2011.

Your mother had a 12 month tourist visa.

Your mother also lodged a permanent visa application with the Australian Department of Immigration as she would like to take up residence in Australia, however, was aware that this may take several years to be processed.

While in Australia she lived with you and you paid for all her expenses.

Your mother has a permanent place of abode in Country X that she retained while she was in Australia.

Your mother has friends and family members in Country X.

You are your mother's only immediate family in Australia. Your mother had no Australian income or assets while in Australia.

Your mother has never previously been a resident or citizen of Australia.

Your mother's income in the 2011 financial year was nil.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).
Income Tax Assessment Act 1936 Section 195J.

Reasons for decision

Dependant parent offset

According to section 195J of the Income Tax Assessment Act 1936 (ITAA 1936), in order to claim the dependant parent offset, your parent's income must be below the relevant threshold amount of $1,540, and they must be a resident of Australia for tax purposes.

As your mother's income was nil in the 2011 year, the only issue to consider is your mother's residency status for tax purposes.

Residency for tax purposes

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are: 

· the resides test,

· the domicile test,

· the 183 day test, and

· the superannuation test.

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides.

However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.

Taxation Ruling TR 98/17 Income Tax: residency status of individuals entering Australia emphasises the quality and character of an individual's behaviour while in Australia assists in determining whether the individual resides here.

All the facts and circumstances that describe an individual's behaviour in Australia are relevant. In particular, the following factors are useful in describing the quality and character of an individual's behaviour:

· intention or purpose of presence

· family and business/employment ties

· maintenance and location of assets, and

· social and living arrangements.

No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances.

Your mother was not residing in Australia while she was here, for the following reasons:

· She retained her home in Country X

· Although she had applied for a permanent visa, she was aware that this could take many years to be approved

· She was aware that she would have to return to Country X when her tourist visa expired

· Other than you, your mother's family and social ties remained in Country X

· Your mother's assets remained in Country X

· Your mother had no assets or income in Australia

Intention is only one factor that is taken into consideration when determining where a person resides. Although your mother intended to become a resident of Australia, she was aware that she had arrived on a tourist visa and would have to return to Country X to live for at least another year, as the process of applying for a permanent visa is very slow.

Therefore, your mother was not a resident of Australia under the resides test. However, if one of the statutory tests is met, then she can still be considered a resident.

The 183 day test

Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual permanent of abode is outside of Australia and they have no intention of taking up residence here.

Your mother was in Australia for more than 183 days. Although your mother had a permanent place of abode, it was her intention to take up residence in Australia.

Therefore, your mother is a resident of Australia under the 183 day test.

As your mother meets this test, there is no need to consider the domicile test or the superannuation test.

Residency status

Your mother does meet one of the tests of residency in the 2011 income year and is therefore a resident of Australia for tax purposes.

Conclusion

As your mother was a resident in the 2011 year and did not have any assessable income, you are entitled to claim the dependant parent offset.