Issue
Is the taxpayer entitled to a Family Tax Assistance benefit under former Division 5 of the Income Tax Rates Act 1986 (ITRA 1986) for the 1996-97 year of income?
Decision
Yes. The taxpayer is entitled to a Family Tax Assistance benefit under former Division 5 of the ITRA 1986 for the 1996-97 year of income.
Facts
The taxpayer and dependant children are residents of Australia for income tax purposes.
The taxpayer entered into a Family Agreement to enable the taxpayer to claim Family Tax Assistance Benefit.
The taxable income of the taxpayer's family is less than the family income ceiling.
The taxpayer had sole care of the children for approximately half of the income year and otherwise contributed to their maintenance.
The taxpayer did not received family tax payments from any other source.
The 3 dependant children were all over the age of 5 years but under the age of 16 years. The children did not earn income from any source.
Reasons for Decision
Former Division 5 of the ITRA 1986 deals with Family Tax Assistance and the increased tax-free threshold for certain resident taxpayers with dependants. There are 2 types of Family Tax Assistance, the Part A benefit and Part B benefit.
To be eligible for the Family Tax Assistance Part A benefit through an income tax return, the taxpayer must: • be an Australian resident (former paragraph 20C(1)(a) of the ITRA 1986); • have at least one dependant child (former paragraph 20C(1)(a) of the ITRA 1986); • have a taxable income that is less than the 'family income ceiling' (former paragraph 20C(1)(b) of the ITRA 1986); • have full care of the child for more than 30 per cent of the number of days in the allocation period, usually the income year (former subsection 20L(3) of the ITRA 1986); and • not receive family tax payment Part A benefit in full (from Medicare or Centrelink) for the child (former section 20Uof the ITRA 1986).
The 'family income ceiling' is defined in former section 20Q of the ITRA 1986.
Former section 20K of the ITRA 1986 states that a child is a dependant child if under 16 years of age or 16 or 17 years old who receives full-time secondary education, and: • the child was an Australian resident • the child was not a spouse of a person • the child's income does not exceed the dependant (under 16) ceiling, or the dependant (over 16) ceiling; and • The taxpayer contributed to the maintenance of the child.
The taxpayer's children are Australian residents, with incomes below the dependant ceiling. The taxpayer contributed to their maintenance. The children are dependant children for the purposes of former section 20K of the ITRA.
The taxpayer is a resident of Australia, has 3 dependant children, has a taxable income less than the family ceiling and has the care of their children for more than 30% of the allocation period.
The taxpayer satisfies the eligibility tests as set out in former Division 5 of the ITRA 1986. Therefore, the taxpayer is entitled to claim the Family Tax Assistance Part A. Note : The Part B benefit provides an additional benefit directed at families with one primary breadwinner and at least one dependant child under 5 years. The taxpayer does not qualify for the Part B benefit as all of the dependent children were over the age of 5.