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Ruling

Subject: Dependant spouse tax offset

Question

Are you entitled to claim a dependant spouse tax offset under section 159J of the Income Tax Assessment Act 1936 (ITAA 1936) if your spouse does not live in Australia?

Answer: Yes.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You moved to Australia from Country X on a 457 visa during 2009.

Your family did not accompany you to Australia.

You have been married to spouse since 19XX.

You send money to your spouse on a regular basis to provide financial support to your family.

After you moved to Australia your spouse received their passport and is intending to migrate once you receive your 199 visa.

You applied for a 199 visa during 2010.

During the 2010-11 year of income you are considered to be a resident of Australia for taxation purposes.

Your taxable income did not exceed $150,000 and your spouse's adjusted taxable income did not exceed $9,426 in the 2010-11 year of income.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1),

Income Tax Assessment Act 1936 Section 159J,

Income Tax Assessment Act Subsection 159J(1) and

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

Reasons for decision

Summary

As your spouse is considered to have a domicile in Australia and does not have a permanent place of abode outside Australia; you are entitled to claim a dependant spouse tax offset for the 2010-11 year of income.

Detailed reasoning

Subsection 159J(1) 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 dependant spouse who is a 'resident of Australia'.

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 dependant spouse tax offset, the dependant spouse of a taxpayer will be taken to have the same domicile as the taxpayer.

Therefore your spouse is deemed to have a domicile in Australia for the purposes of the definition of resident in subsection 6(1) of the ITAA 1936. Subsection 6(1) of the ITAA 1936 defines a resident to include a person whose domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside 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.

In your case, your spouse is currently living overseas and therefore their current 'place of abode' is overseas; however this is only a temporary arrangement. Even though your spouse has to wait until you receive your 199 visa, they have made appropriate steps and intends to migrate to Australia as soon as possible. Accordingly, the Commissioner accepts that your spouse does not have a permanent place of abode outside of Australia.

As your spouse is deemed to have a domicile in Australia and does not have a permanent place of abode outside of Australia, they are considered to be a resident under the definition under subsection 6(1) of the ITAA 1936. Therefore you have a resident dependant and are entitled to a dependant spouse tax offset under section 159J of the ITAA 1936.