Edited version of your private ruling

Authorisation Number: 1012479743732

Ruling

Subject: Dependent tax offset

Question 1

Are you entitled to a dependant relative tax offset for your parents?

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 parents arrived in Australia more than six months ago.

Your parents did not have any assessable income or Centrelink benefits.

You and your parents lived with a relative.

You provided the primary support for your parents and supported their financial, medical and other needs.

Your adjusted taxable income (ATI) is below the threshold to be entitled to the dependant parent tax offset.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159J

Income Tax Assessment Act 1936 Subsection 6(1)

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 taxpayer is entitled to a tax offset where, during the income year, he or she contributes to the maintenance of a dependant who is a resident of Australia.

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 2011-12 was more than $150,000

· you had a spouse for all of 2011-12 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

· your ATI

· your spouse's ATI for 2011-12 multiplied by the number of days they were your spouse divided by 365.

The amount of the tax offset is reduced if:

· the dependant's ATI is $286 or more

· you maintained the dependant for only part of the year

· another person helped you maintain the dependant, or

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

In order to determine your eligibility to claim a parent tax offset under subsection 159J(1) of the ITAA 1936, it is necessary to determine whether your parents were residents of Australia during the period of their stay.

 'Australian resident' is defined in section 995-1 of the Income Tax Assessment Act 1997 as a person who is a resident of Australia for the 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:

(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)

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 six 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 you have contributed to the maintenance of your parents, that your parents are Australian residents for tax purposes and that your ATI is below the relevant threshold. Therefore you are entitled to a dependant tax offset for your parents.