Edited version of your private ruling

Authorisation Number: 1012579746444

Ruling

Subject: Dependant Tax Offset

Question

Are you entitled to a Dependant Tax Offset?

Answer

No

This ruling applies for the following periods

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on

1 July 2009

Relevant facts

You have a dependant relative who is a resident of an overseas country.

You have sponsored your relative to come to Australia under a tourist visa.

Your relative has no intention of staying in Australia. They are only here to assist you.

A condition of this visa is your relative must depart Australia every year.

Your relative returns overseas to the family home where your other relatives still live.

Your relative stays with you for x months or more on every visit to Australia.

Your relative is no longer working and is fully dependant on you for support.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159J

Income Tax Assessment Act 1936 Subsection 159J(2)

Income Tax Assessment Act 1936 Subsection 159J(1)

Income Tax Assessment Act 1997 Subdivision 61-A

Reasons for decision

2010, 2011, 2012 financial years

Dependant tax offsets are available under section 159J of the Income Tax Assessment Act 1936 (ITAA 1936). Under subsection 159J(2) of the ITAA 1936, a dependant tax offset is available for a dependant who is a parent of the taxpayer or of the taxpayers spouse.

In order to claim a dependant tax offset, the dependant must be a resident of Australia for taxation purposes (subsection 159J(1) of the ITAA 1936).

Residency status

An 'Australian resident' is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as a person who is a resident of Australia for the purposes of the ITAA 1936.

The term 'resident' or 'resident of Australia' is defined in subsection 6(1) of the ITAA 1936. This definition, in effect, provides four tests for determining whether an individual is a resident of Australia for taxation purposes. These tests are:

• residence according to ordinary concepts

• the domicile and permanent place of abode test

• the 183 day test

• the Commonwealth superannuation fund test

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word 'resides'. However, where an individual does not reside in Australia according to ordinary concepts, the other three tests must be considered.

Residence according to ordinary concepts

The ordinary meaning of the word 'reside', according to the Shorter Oxford English Dictionary, is to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place.

Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia, provides the Commissioner's interpretation of the ordinary meaning of the word 'resides' within the definition of resident in subsection 6(1) of the ITAA 1936.

This ruling states that the ordinary meaning of the word 'reside' is wide enough to encompass an individual who comes to Australia permanently (for example, a migrant) and an individual who is dwelling here for a considerable time. It also states that a migrant who comes to Australia with the intention to reside here permanently is a resident from arrival.

However, when an individual arrives in Australia not intending to reside here permanently, all the facts about his or her presence must be considered in determining residency status. The amount of physical presence or length of time in Australia is not by itself decisive when determining whether an individual resides in Australia. The quality and character of an individual's behaviour during the time spent in Australia is considered in determining if this is consistent with residing here.

Factors taken into consideration regarding the quality and character of an individual's behaviour include:

• intention or purpose of presence;

• family and business/employment ties;

• maintenance and location of assets; and

• social and living arrangements.

No single factor is necessarily decisive. Weight is given to each factor and varies depending on individual circumstances.

Your situation

Intention or purpose of presence

Your relative travelled to Australia during the 2010-2012 financial years and stayed for x months or more. They were granted entry to Australia on a tourist visa. They had no intention to live in Australia as they were only here to assist you.

Family and business/employment ties

Your relative still has family ties overseas as your other relatives still live there. They did not work or seek work during their visit to Australia.

Maintenance and location of assets

Your relative maintained a residence overseas. Your relative returned to this residence when they left Australia.

Social and living arrangements

During their time in Australia, you were fully responsible for your relative and they resided with you while in Australia. Your relative's social and living arrangements during their stay in Australia, indicates that they were a visitor.

Based on the above, it is considered your relative did not reside in Australia according to ordinary concepts.

Therefore, we now need to consider the other three residency tests.

Domicile & permanent place of abode

Under the domicile and permanent place of abode test, a person whose domicile is in Australia will be a resident of Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia.

Taxation Ruling IT 2650 Income tax: Residency - Permanent place of Abode outside Australia, discusses the domicile and permanent place of abode test, and provides the following information in relation to domicile.

Domicile is a legal concept. The primary common law rule is that a person acquires at birth a domicile of origin, being the country of their father's permanent home. A person retains the domicile of origin unless and until they acquire a domicile of choice in another country, or until they acquire another domicile by operation of law.

In order to show that a new domicile of choice in a particular country has been adopted, a person must be able to prove an intention to make his or her home indefinitely in that country, for example, through having obtained a migration visa.

Your relative's domicile

Your relative's domicile of origin is not Australia. During the 2010-2012 financial years, there is no intention to make their home definitely in Australia. They came to Australia on a tourist visa and must depart Australia every year.

Therefore, for the 2010-2012 financial years, they were not a resident of Australia under the domicile and permanent place of abode test.

The 183 day test

This test applies where a person is actually present in Australia for a total period of more than half the year of income, unless their usual home is overseas and they do not intend to live in Australia.

During the 2010-2012 financial years, you stated that your relative has returned to their residence overseas.

There has been no intention that your relative was to reside in Australia.

Therefore, for the 2010-2012 financial years, they were not a resident of Australia under the 183 day test.

The Commonwealth superannuation fund test

This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age).

This test does not apply in your circumstances.

Conclusion

Your relative is not considered to have been a resident of Australia for taxation purposes for the 2010-2012 financial years. Your relative entered Australia on a tourist visa and returned to their permanent place of abode overseas.

Therefore, you are not entitled to the parents tax offset available under subsection 159J(2) of the ITAA 1936 for the 2010-2012 financial years.

2013 financial year

The Government announced in the 2012-13 Budget they would remove the eight existing dependency tax offsets. These included the invalid relative tax offset, the parent tax offset and the housekeeper tax offset.

From 1 July 2012, taxpayers can claim a new tax offset called the 'Dependant (Invalid and Carer) tax offset'.

The Dependant (Invalid and Carer) tax offset is contained in Subdivision 61-A of the ITAA 1997.

A taxpayer can only claim for an eligible dependant whilst the dependant is an Australian resident.

In your case your relative lives overseas and has travelled to Australia under a tourist visa. They are not a resident of Australia.

Therefore you are not entitled to claim a Dependant (Invalid and Carer) Tax Offset for your relative for the 2013 financial year.