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Is the taxpayer, a resident of Australia, entitled to a dependant spouse tax offset under subsection 159J(1) of the Income Tax Assessment Act 1936 (ITAA 1936) in respect of their spouse who resides overseas?

No, the taxpayer is not entitled to a dependant spouse tax offset under subsection 159J(1) of the ITAA 1936 as their spouse was not a resident of Australia.

The taxpayer migrated to Australia and was granted permanent residency.

The taxpayer's spouse continued to reside overseas.

The taxpayer supported their spouse by sending money. The spouse had no other means of support.

Six years after arrival in Australia the taxpayer applied for partner migration but their spouse has not as yet migrated to Australia.

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.

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)

The taxpayer permanently resides in Australia and is therefore a resident as defined in subsection 6(1) of the ITAA 1936.

The taxpayer's spouse is not a resident according to ordinary concepts as they reside overseas. The taxpayer's spouse also does not satisfy the 183 day rule and Commonwealth superannuation test.

Under the domicile and permanent place of abode test, a person will be a resident of Australia if he or she has an Australian domicile, unless the Commissioner of Taxation is satisfied that the person has established a permanent place of abode outside Australia.

Subsection 159J(3A) of the ITAA 1936 provides that in applying the definition of 'resident' in subsection 6(1) of the ITAA 1936 certain dependants, including a spouse, shall be deemed to have a domicile in Australia at all times when the taxpayer has a domicile in Australia. Consequently, the taxpayer's spouse is deemed to have a domicile in Australia under subsection 159J(3A) of the ITAA 1936.

Where a person's domicile is in Australia, it is necessary to then consider whether or not the person has a permanent place of abode 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 or the physical surroundings in which a person lives.

The taxpayer's spouse lives overseas and has done so for at least the six years that the taxpayer has resided in Australia. While the taxpayer's spouse may intend to migrate to Australia in the future, their 'permanent place of abode' is outside Australia.

Although the taxpayer's spouse has a deemed domicile in Australia, the Commissioner is not satisfied that the taxpayer's spouse has a permanent place of abode in Australia. The taxpayer's spouse is therefore not a resident for the purposes of subsection 6(1) of the ITAA 1936. Consequently, the taxpayer is not entitled to a dependant spouse tax offset under subsection 159J(1) of the ITAA 1936.