Spouse Tax Offset: separated spouse in receipt of family tax benefit

Is the taxpayer entitled to a spouse tax offset under section 159J of the Income Tax Assessment Act 1936 (ITAA 1936) even though their separated spouse is in receipt of the family tax benefit at the Part B rate under the A New Tax System (Family Assistance) Act 1999 (ANTS (FA) Act 1999)?

Yes. The taxpayer is entitled to a spouse tax offset under section 159J of the ITAA 1936 even though their separated spouse is in receipt of the family tax benefit at the Part B rate under the ANTS (FA) Act 1999 as they are no longer living together?

The taxpayer is separated from their spouse and they do not live together.

The taxpayer is still legally married to their spouse.

The taxpayer and their spouse are both residents of Australia.

The taxpayer contributed to the maintenance of their spouse during the income year.

The spouse's separate net income for the income year was below the threshold over which no offset is allowable.

The spouse is not being maintained by another person.

The spouse receives the family tax benefit at the Part B rate under the ANTS (FA) Act 1999.

Section 159J of the ITAA 1936 allows a tax offset where a taxpayer contributes to the maintenance of a dependant who is a resident. Subsection 159J(2) of the ITAA 1936 specifies that a dependant includes a taxpayer's 'spouse'.

In relation to the meaning of the word 'spouse', The Macquarie Dictionary [Multimedia], version 5.0.0, 1/10/01 contains the following definitions: • Spouse, as '...either member of a married pair in relation to the other; one's husband or wife'. • Husband, as '...a man joined in marriage to a woman'. • Wife, as '...a woman joined in marriage to a man'.

Subsection 6(1) of the ITAA 1936 extends the common meaning of 'spouse' to include: ...in relation to a person, includes another person who, although not legally married to the person, lives with the person on a bona fide domestic basis as the husband or wife of the person.

As the taxpayer is still legally married their separated spouse is still a dependant for the purposes of section 159J of the ITAA 1936.

Subsection 159J(1AA) of the ITAA 1936 states: A taxpayer is not entitled, in his or her assessment in respect of a year of income, to a rebate under this section in respect of a dependant included in class 1 or 2 [which includes a spouse] in the table in subsection (2), if, during the whole of that year of income: (a) the taxpayer, or the taxpayer's spouse while being the taxpayer's partner as defined in the A New Tax System (Family Assistance) Act 1999 , was eligible for family tax benefit at the Part B rate within the meaning of that Act; and (b) clause 31 of Schedule 1 to that Act did not apply to the Part B rate.

Subsection 3(1) of the ANTS (FA) Act 1999 states that 'partner' has the same meaning as in the Social Security Act 1991 (SSA 1991).

Subsection 4(1) of the SSA 1991 states 'a partner, in relation to a person who is a member of a couple, means the other member of the couple.'

Further, subparagraph 4(2) of the SSA 1991 states that: Subject to subsection (3), a person is a member of a couple for the purposes of this Act if: (a) the person is legally married to another person and is not, in the Secretary's opinion (formed as mentioned in subsection (3)), living separately and apart from the other person on a permanent or indefinite basis; or (b) all of the following conditions are met: (i) the person has a relationship with a person of the opposite sex (in this paragraph called the "partner"); (ii) the person is not legally married to the partner; (iii) the relationship between the person and the partner is, in the Secretary's opinion (formed as mentioned in subsections (3) and (3A)), a marriage-like relationship; (iv) both the person and the partner are over the age of consent applicable in the State or Territory in which they live; (v) the person and the partner are not within a prohibited relationship for the purposes of section 23B of the Marriage Act 1961 .

Subsection 4(3A) of the SSA 1991 states: The Secretary must not form the opinion that the relationship between a person and his or her partner is a marriage-like relationship if the person is living separately and apart from the partner on a permanent or indefinite basis.

The taxpayer is 'living separately and apart' from their spouse. Thus, according to subsection 4(3A) of the SSA 1991, the taxpayer and their separated spouse are not a 'couple' for the purposes of the SSA 1991.

As the taxpayer and their separated spouse are not a 'couple' for the purposes of the SSA 1991, the separated spouse is not considered to be the taxpayer's 'partner' for the purposes of the SSA 1991.

The taxpayer's separated spouse is not then considered to be the taxpayer's 'partner' for the purposes of the ANTS (FA) Act 1999.

Consequently, the taxpayer's separated spouse is not the taxpayer's 'partner' for the purposes of subsection 159J(1AA) of the ITAA 1936. Therefore the taxpayer retains their entitlement to the dependant tax offset with regard to their separated spouse.

The amount of the family tax benefit received by the taxpayer's separated spouse is excluded from the definition of separate net income (subsection 159J(6) of the ITAA 1936) and does not reduce the amount of the tax offset otherwise allowable to the taxpayer.

Accordingly, the taxpayer is entitled to a dependant spouse tax offset under section 159J of the ITAA 1936 in relation to their separated spouse who is in receipt of a family tax benefit.