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Authorisation Number: 1012030476985

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Ruling

Subject: Dependant spouse tax offset

Question 1

Are you entitled to a dependant spouse tax offset for the 2009-10 and 2010-11 financial years in respect of a spouse you married while overseas but who is not yet living in Australia?

Answer: No

Question 2

Are you entitled to a dependant spouse tax offset for the 2008-09 financial year in respect of a spouse you married while overseas but who is not yet living in Australia?

Answer: Decline to rule

This ruling applies for the following period

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on

1 July 2008

Relevant facts and circumstances

You are a resident of Australia with an Australian Citizenship Certificate.

You were married overseas in November 2007. You hold a marriage certificate.

You returned to Australia later in 2007, however your spouse remained overseas.

Your spouse wishes to migrate to Australia and an application for a spouse visa was lodged in 2008.

You send monthly payments overseas to support your spouse, with the payments beginning during 2008.

Your spouse's initial visa application was rejected due to outstanding loans in another country.

Your spouse's second visa application was also rejected.

You are still applying for a visa for your spouse so that they can join you in Australia.

Your spouse has resided at the same overseas address since your marriage in 2007.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1936 Section 159J

Income Tax Assessment Act 1936 Subsection 159J(3A)

Reasons for decision

Question 1

Summary

You are not entitled to a dependant spouse tax offset under section 159J of the Income Tax Assessment Act 1936 (ITAA 1936) in respect of your spouse who lives overseas, as your spouse has a permanent place of abode outside Australia and is therefore not considered a resident of Australia for tax purposes.

Detailed reasoning

Section 159J of the 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 spouse who is a 'resident of Australia'.

Subsection 6(1) of the ITAA 1936 defines a 'resident' or a 'resident of Australia'. The definition provides four tests to ascertain whether a person is a resident of Australia for income tax purposes. These tests are:

(1) Residence according to ordinary concepts (primary test)

(2) Domicile and permanent place of abode test (first statutory test)

(3) 183 day rule (second statutory test)

(4) Commonwealth superannuation test (third statutory test)

You have resided in Australia since 1979 and are therefore a resident as defined in subsection 6(1) of the ITAA 1936.

Your spouse is not a resident according to ordinary concepts as they reside overseas. Your spouse also does not satisfy the 183 day rule as they have not been in Australia for more than 183 days in any financial year, nor do they meet the Commonwealth superannuation test as they are not a member of the Commonwealth Public Service.

Under the domicile and permanent place of abode test, a person will be a resident of Australia if he or she has an Australian domicile, unless the Commissioner is satisfied that the person has established a permanent place of abode outside Australia.

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 dependant spouse tax offset the dependant spouse of a taxpayer will be taken to have the same domicile as the taxpayer. Your spouse is therefore, deemed to have a domicile in Australia for the purposes of the definition of a resident in subsection 6(1) of the ITAA 1936.

The leading case on permanent place of abode is Applegate v. Federal Commissioner of Taxation 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 or the physical surroundings in which a person lives.

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 Australia.

Your spouse lives overseas and has lived at the same address since your marriage in 2007.

While your spouse may intend to migrate to Australia in the future, and has clearly taken steps to do so by applying for a visa in 2008 and again in 2010, the fact remains that your spouse has lived at the same overseas address for more than four years, and still continues to do so. This indicates that their stay in the overseas country is more than just a temporary arrangement and in fact has a character of permanency.

Although your spouse has a deemed domicile in Australia, and you are contributing to their maintenance, the Commissioner is satisfied that your spouse has established a permanent place of abode outside Australia. Your spouse is therefore not a resident for the purposes of subsection 6(1) of the ITAA 1936. Consequently, you are not entitled to a dependant spouse tax offset under section 159J of the ITAA 1936.

Reasons for decision

Question 2

The Commissioner may decline to give a private ruling in certain circumstances, including situations where we have already considered this issue for you - for example, in an audit relating to the particular question: Taxation Ruling TR 2006/11.

In your case, in your original income tax assessment for the 2008-09 financial year, you claimed a dependent spouse tax offset. As a result of an audit, your assessment was amended to disallow your claim for the dependant spouse tax offset. As we have already considered this issue for you in the 2008-09 financial year, the Commissioner will decline to rule on this matter for this period.

Therefore, if you wish for the audit decision to disallow the dependant spouse tax offset in the 2008-09 financial year to be reviewed, you will need to lodge an objection to the amended assessment.

Please refer to the attached 'Private rulings fact sheet' for information on objections.