Issue
Is the taxpayer entitled to a dependant tax offset for their parent in law under subsection 159J(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes. The taxpayer is entitled to a dependant tax offset for their parent in law under subsection 159J(1) of the ITAA 1936 from the date the parent in law becomes a resident of Australia for taxation purposes.
Facts
The taxpayer's parent in-law had until recently been living overseas and was at that time a non resident for Australian tax purposes.
The taxpayer's parent in law moved to Australia during the income year and is an Australian resident for taxation purposes from the date of their arrival.
The taxpayer was the sole contributor to the maintenance of their parent in law both before and after they arrived in Australia.
The taxpayer's parent in-law has separate net income below the relevant amount above which there is a reduction of the dependant tax offset.
Reasons for Decision
Subsection 159J(1) of the ITAA 1936 provides that a dependant tax offset is allowed where a taxpayer contributes to the maintenance of a dependant.
Subsection 159J(2) of the ITAA 1936 states that a parent of the taxpayer, or of the taxpayer's spouse, may be a dependant.
The dependant person must be a resident of Australia for the dependant tax offset to be allowable (subsection 159J(1) of the ITAA 1936).
Under paragraph 159J(3)(aa) of the ITAA 1936 a partial dependant tax offset will be allowed where the dependant is a resident for only part of the income year. The amount of the dependant tax offset allowed will be an amount considered by the Commissioner to be reasonable in the circumstances. It is reasonable to calculate the dependant tax offset on a pro rata basis for the period that the dependant was a resident.
The taxpayer's parent in law is their dependant for the purposes of the dependant tax offset.
The taxpayer will be entitled to a partial dependant tax offset calculated on a pro rata basis, under subsection 159J(3) of the ITAA 1936, from the date that their parent in law arrived in Australia and became a resident for taxation purposes.