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Is the taxpayer entitled to a dependant spouse tax offset under section 159J of the Income Tax Assessment Act 1936 (ITAA 1936) where the spouse does not live in Australia?

Yes. The taxpayer is entitled to a dependant spouse tax offset under section 159J of the ITAA 1936 where the spouse does not live in Australia as a result of the operation of subsection 159J(3A) of the ITAA 1936.

The taxpayer came to Australia as a refugee and is now a resident for tax purposes.

The taxpayer's spouse was unable to accompany the taxpayer at that time. They have however now sought to immigrate to Australia. Their application has not yet been finalised.

The application for the spouse's immigration was made within 6 months of the taxpayer's arrival in Australia and has been outstanding for 12 months.

The taxpayer has been sending money to their spouse who is dependent on the taxpayer for financial support.

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 spouse who is a resident of Australia.

A 'resident' or 'resident of Australia' is defined in subsection 6(1) of the ITAA 1936, and includes a person who resides in Australia, or whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia.

However, subsection 159J(3A) of the ITAA 1936 provides that in applying the definition of resident in subsection 6(1) of the ITAA 1936 for the purposes of the dependant spouse tax offset, the dependant spouse of a taxpayer will be taken to have the same domicile as the taxpayer when the taxpayer has a domicile in Australia.

The taxpayer's spouse is therefore deemed to have a domicile in Australia for the purposes of the definition of resident in subsection 6(1) of the ITAA 1936, and will be considered a resident of Australia unless the Commissioner is satisfied that their permanent place of abode is outside Australia.

The leading case on permanent place of abode is Federal Commissioner of Taxation v. Applegate [1979] FCA 66; 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 Income tax: residency - permanent place of abode outside Australia (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.

While the taxpayer's spouse is currently living overseas, and therefore their current 'place of abode' is overseas, this is only a temporary arrangement. The spouse intends to follow the taxpayer to Australia as soon as possible. They have taken timely and appropriate steps to immigrate as soon as possible. The Commissioner accepts that the taxpayer's spouse does not have a permanent place of abode outside of Australia.

As the taxpayer's spouse is deemed to be domiciled in Australia and does not have a permanent place of abode outside of Australia, they are a resident under the definition under subsection 6(1) of the ITAA 1936. Therefore, as the taxpayer has contributed to the maintenance of a resident spouse, the taxpayer is entitled to a dependant spouse tax offset under section 159J of the ITAA 1936, providing the other requirements of the section are satisfied.

Date of amendment Part Comment 27 June 2014 Reasons for Decision Adjusted wording to better reflect the legislation and relevant public ruling, and to improve clarity Related ATO Interpretative Decisions Removed reference to ATO ID 2001/423 as the ATO ID has been withdrawn

Date of amendment | Part | Comment

27 June 2014 | Reasons for Decision | Adjusted wording to better reflect the legislation and relevant public ruling, and to improve clarity

Related ATO Interpretative Decisions | Removed reference to ATO ID 2001/423 as the ATO ID has been withdrawn