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Is the taxpayer entitled to claim a housekeeper tax offset under section 159L of the Income Tax Assessment Act 1936 (ITAA 1936) where they engaged a housekeeper during the period the taxpayer's child was critically ill in hospital?

Yes. Sufficient special circumstances exist for the taxpayer to be entitled to claim the housekeeper tax offset under section 159L of the ITAA 1936.

The taxpayer's child who was under 21 years of age was diagnosed with a critical illness which required the child to be hospitalised for nearly 5 months.

The taxpayer was required to stay with the child at the hospital from morning until evening every day and was unable to look after their other child. The taxpayer was required to care for the child at all times in order to give the child the necessary attention. The taxpayer was required to stay overnight at the hospital during this period.

The taxpayer's spouse worked full-time and was unable to look after the other child.

The taxpayer hired a housekeeper on a full-time basis to look after the other child day and night and to be responsible for the general running of the household.

The taxpayer did not receive any Family Tax Benefit (FTB) - Part B at any time throughout the income year.

Subsection 159L(1) of the ITAA 1936 allows a tax offset where a housekeeper is wholly engaged in keeping house in Australia for a taxpayer and who cares for: • a child of the taxpayer less than 21 years of age; • a child, whether or not a student, under 21 years of age and the taxpayer is entitled to a notional rebate for that child; • an invalid relative for whom the taxpayer is entitled to a dependant tax offset; or • the spouse of the taxpayer who is in receipt of a disability support pension under the Social Security Act 1991 (SSA 1991).

For a taxpayer with a spouse to be entitled to a housekeeper tax offset, special circumstances must exist - unless the care is for the taxpayer's spouse who is in receipt of a disability support pension under the SSA 1991 (subsection 159L(4) of the ITAA 1936).

Special circumstances are a question of fact and degree. For example, the fact that a husband and wife both work and need a housekeeper to look after their children and attend to household duties in their absence is regarded as an ordinary, rather than a special circumstance.

Special circumstances include where: • one partner to a marriage is deserted by the other and is obliged to engage a housekeeper to care for the children and attend to household duties when he/she goes out to work; • a taxpayer had an extremely busy public life as a politician (Case J70 77 ATC 579; (1977) 22 CTBR (NS) Case 20); and • a taxpayer had a severely retarded child who needed constant attention (Case M83 80 ATC 613; (1980) 24 CTBR (NS) Case 58).

The taxpayer had a child in hospital who required constant attention. The taxpayer was unable to care for their other child or attend to household management. The taxpayer's spouse was engaged in full-time work and was also unable to care for their other child or manage the household. Special circumstances can be said to exist as the family arrangements required a housekeeper in order to meet the daily needs of the other child and general household management.

In these special circumstances, the taxpayer is entitled to claim the housekeeper tax offset under section 159L of the ITAA 1936. Note 1 From 1 October 2010 new rules apply under section 159LA of the ITAA 1936, such that a taxpayer is not entitled to a tax offset in respect of a housekeeper,if the taxpayer does not contribute to the maintenance of a spouse in receipt of a disability support pension under the SSA 1991and either or both of the following apply; • the taxpayer is a member of a family tax benefit (Part B) family without shared care; • parental leave pay is payable under the Paid Parental Leave Act 2010 to the taxpayer, or to the taxpayer's spouse while being the taxpayer's partner. Note 2 A taxpayer is not entitled by virtue of subsection 159L(3B) of the ITAA 1936 to claim the housekeeper tax offset: • For the 2008-2009 income year if the taxpayer's taxable income for the year is more than $150,000; • For the 2009-2010 and later income years if the sum of the adjusted taxable incomes of the taxpayer and spouse exceed the income limit for FTB - Part B for the year.