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Ruling

Subject: Dependant tax offset

Question 1

Are you entitled to a dependent parent offset for your father?

Answer

No.

Question 2

Are you entitled to a partial dependent parent offset for your mother?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2011

Year ending 30 June 2012

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You are an Australian resident for tax purposes.

Your mother and father are Australian residents for tax purposes.

You live with your parents.

You do not have a spouse.

You give your parents approximately $1,X00 per month to help contribute to the food and other expenses of the household.

Your mother does not work and does not have any other source of income.

Your father is employed and you estimate his adjustable taxable income (ATI) to be between $3X,000 and $40,000 for the years ending 30 June 2011 and 30 June 2012.

You expect that your ATI will be below $150,000 for the years ending 30 June 2011 and 30 June 2012.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 159J(1),

Income Tax Assessment Act 1936 Subsection 159J(2) and

Income Tax Assessment Act 1936 Subsection 159J(4).

Reasons for decision

Summary

You are not entitled to claim the dependant tax offset in relation to your father as his adjustable taxable income is above the amount at which the offset is reduced to zero. You are however, able to claim a portion of the dependant parent offset in relation to you mother, but only to the extent of your contribution to her maintenance.

Detailed reasoning

Subsection 159J(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a dependant tax offset is allowed where a resident taxpayer contributes to the maintenance of a dependant who is an Australian resident. Subsection 159J(2) of the ITAA 1936 states that a parent of the taxpayer, or of the taxpayer's spouse, may be a dependant.

You are considered to have maintained a dependant if any of the following applied;

· you and your dependant lived in the same house

· you gave your dependant food, clothing and lodging

· you helped them to pay for their living, medical and educational costs.

You cannot claim this tax offset if:

· your adjusted taxable income (ATI) for 2010-11 was more than $150,000

· you had a spouse for all of 2010-11 and the combined ATI of you and your spouse was more than $150,000

· you had a spouse for only part of the year and the sum of the following is more than $150,000

o your ATI

o your spouse's ATI for 2010-11 multiplied by the number of days they were your spouse divided by 365.

ATI is the sum of a taxpayer's taxable income, reportable superannuation contributions, total net investment and rental losses, adjusted fringe benefits, income from certain tax-free pensions and target foreign income less any child support payments made by the taxpayer.

From the information you have provided it is accepted that you have contributed to the maintenance of your parents and you may be eligible to claim a dependant tax offset.

However any tax offset is reduced if:

· the dependant's adjusted taxable income (ATI) is $286 or more

· you maintained the dependant for only part of the year

· another person helped you maintain the dependant

· the dependant lived in Australia for only part of the year.

The maximum dependent parent tax offset allowable for the 2010-11 year of income is $1676 for each parent that was maintained. The available tax offsets are reduced by $1 for every $4 of ATI over $282, which your dependants earned (subsection 159J(4) of the ITAA 1936). The offset for the 2010-11 year is reduced to zero when the ATI of the dependant reaches $6,986.

You have indicated that your father's annual income is between $3X,000 and $40,000. Your father's ATI would therefore be above the level at which the offset is reduced to zero. Accordingly, you are unable to claim the dependant parent offset in relation to your father.

You are eligible to claim the dependant parent offset in relation to your mother as you have contributed to her maintenance. However, where another person has also contributed to the maintenance of a dependant, the taxpayer can only claim a portion of the offset, according to the extent of their contribution. As your father would also contribute to the maintenance of your mother, your offset will be reduced. You are entitled to claim a partial dependant parent offset in relation to your mother according to the extent of your contribution.