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Ruling

Subject: Dependant tax offset

Question:

Are you entitled to a dependant tax offset for your parent?

Answer:

Yes.

This ruling applies for the following periods:

Year ended 30 June 2012

The scheme commences on:

1 July 2011

Relevant facts and circumstances

Your parent came into Australia on a one year visa.

Your parent will be leaving after staying with you for a period of more than six months.

You and your parent are living in the same house.

You are providing your parent with food, clothing, travel expenses, lodging and meeting all their needs.

Your and your spouse's adjusted taxable income (ATI) is less than $150,000

Your parent's ATI is $0.

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 dependant 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 taxpayer's spouse, may be a dependant.

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. 

From the information provided, we accept that your parent is an Australian resident for tax purposes during their stay.

Therefore, as you are contributing to the maintenance of a dependant who is an Australian resident and the ATI of you and your spouse was not more than $150,000, you are entitled to a dependant tax offset in respect of your parent. As your parent's ATI was $0, the amount of the tax offset does not need to be reduced because of their income.

Note

Where another person or persons contributed to the maintenance of your dependant, you can claim part of the allowable tax offset, according to the extent of your contribution. For example, if you and another person contributed equally to the maintenance of your dependent parent, you can claim half of the allowable tax offset.

As your parent was a resident for only part of the year the tax offset will need to be apportioned.