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Ruling
Subject: Dependent tax offset
Question:
Are you entitled to a dependent tax offset for your parent?
Answer:
Yes.
This ruling applies for the following periods:
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
The scheme commences on:
1 July 2011
Relevant facts and circumstances
Your parent came to reside in Australia several years ago.
They have resided with you since this time.
They are neither an Australian Permanent Resident nor Citizen.
They reside in Australia on a visa and receive medical treatment at a local medical facility.
You support them financially and have been doing so since their arrival.
Your adjusted taxable income is below $150,000
You do not have a spouse.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1),
Income Tax Assessment Act 1936 Section 159J and
Income Tax Assessment Act 1997 Section 995-1.
Reasons for decision
Subsection 159J(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a dependent tax offset is allowed where a 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 taxpayers spouse, may be a dependant.
You are unable to claim the dependent tax offset if your adjusted taxable income (ATI) for 2011-12 was more than $150,000.
Also, if you maintained a parent for the whole year and their ATI for 2011-12 was $7,186 or more; your dependent tax offset claim will be reduced to nil.
The term Australian resident is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). It means a person who is a resident of Australia for purposes of the ITAA 1936.
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:
· Residence according to ordinary concepts (primary test)
· Domicile and permanent place of abode test (first statutory test)
· 183 day rule (second statutory test)
· Commonwealth superannuation test (third statutory test)
If a taxpayer is considered to reside in Australia under the first test, the other tests do not need to be considered.
The circumstances in which an individual entering Australia will be treated as residing here are considered in Taxation Ruling TR 98/17. The ruling provides that individuals who enter Australia and extend their stay beyond 6 months are regarded as residents from the time of their arrival, as long as their intention and presence has a habitual and routine character during the entire period.
In your case, your parent came to reside in Australia several years ago and has resided with you since that time. They reside in Australia on a visa as they receive medical treatment at a local medical facility. You have been supporting them financially since their arrival in Australia. Accordingly, your parent is considered to be a resident of Australia for taxation purposes.
Therefore, as you are contributing to the maintenance of a dependent who is an Australian resident and your ATI was not more than $150,000, you are entitled to a dependent tax offset in respect of your parent.
Note:
Where a person is entitled to a dependent tax offset, that tax offset may be reduced in part or in full by the dependant's ATI. The amount of the tax offset otherwise allowable under this section in respect of a dependant shall be reduced by $1 for every $4 by which the dependant's ATI for the year of income exceeds $286.
ATI is the sum of a person'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 person.
Therefore, to calculate the amount of dependent tax offset that you can claim you will need to know your parent's ATI. You should confirm with them the income that they receive (if any).