Reduction in dependant spouse rebate

Whether the taxpayer, whose spouse is in receipt of a basic parenting allowance, is required to take this allowance into account in determining their entitlement to a dependant spouse rebate under section 159J of the Income Tax Assessment Act 1936 (ITAA 1936).

The taxpayer must take the basic parenting allowance into account in determining their entitlement to a dependant spouse rebate under section 159J (ITAA 1936).

The taxpayer is in receipt of a job search allowance. The taxpayer's spouse is in receipt of a basic parenting allowance of $400. The taxpayer's spouse also has a separate net income that exceeds $282 in addition to the basic parenting allowance.

The couple has a dependant child for the full year and all are residents of Australia.

A taxpayer may be entitled to a rebate for a dependant under section 159J (ITAA 1936) where the taxpayer contributes to the maintenance of a dependant and that dependant is a resident.

Subsection 159J(5E) (ITAA 1936) operates to reduce the rebate allowable in respect of a dependant spouse by any basic parenting allowance paid to the spouse during the year of income. The spouse rebate is reduced on a dollar for dollar basis.

This reduction only occurs after taking into account any reduction of the rebate under any other provision of section 159J (ITAA 1936).

In this case, the dependant spouse rebate is calculated by commencing with the prescribed maximum rebate entitlement under section 159J (ITAA 1936) for a dependant spouse with a child. As the spouse has a separate net income, the dependant spouse rebate entitlement is reduced under subsection 159J(4) (ITAA 1936) by $1 for every $4 by which the separate net income derived by the dependant spouse in the year of income exceeds $282. Under subsection 159J(5E) (ITAA 1936) the rebate entitlement is then further reduced by the basic parenting allowance of $400 that is received by the dependant spouse.