Income Tax: Baby Bonus - whether a valid claim has been made

Has a taxpayer, who has made a claim for the first child tax offset (baby bonus) under paragraph 61-405(b) of the Income Tax Assessment 1997 (ITAA 1997) in the approved form and subsequently lodged a tax return for the same income year, made a valid claim?

Yes. Where a taxpayer who is entitled to the baby bonus, makes a choice to claim the baby bonus in a year of income in the approved form, the claim will be accepted as valid and cannot be revoked irrespective of whether the taxpayer subsequently lodges a tax return for the same income year.

The taxpayer had a child during the 2001-02 income year.

The taxpayer is entitled to claim the baby bonus.

The taxpayer lodged a claim for their baby bonus entitlement for the 2001-02 income year in the approved form in the belief that they were not required to lodge an income tax return for the year of income.

The taxpayer received a payment for their baby bonus entitlement based on the claim submitted.

The taxpayer was later advised by their accountant that due to their investment income, they were required to lodge an income tax return for the same income year.

The taxpayer at this stage realised that their spouse would have received a larger tax offset if they had transferred the baby bonus entitlement to their spouse.

The taxpayer then lodged their income tax return for the 2001-02 income year. In their return they sought to revoke their original baby bonus claim by arguing that the claim was invalid as it had not been lodged with an income tax return as required under paragraph 61-405(a) of the ITAA 1997.

The object of the baby bonus is to recognise the loss of income that generally follows the arrival of a family's first child. It is designed to pay back to the person entitled to the baby bonus the tax paid on their income (up to a limit) in the year prior to the birth of the child. The person with the primary entitlement to the baby bonus is determined under the selection rules prescribed in subsection 61-375(3) of the ITAA 1997. The person with the primary entitlement will have the choice of claiming the baby bonus entitlement for themselves or transferring it to their spouse.

Paragraph 61-405(a) of the ITAA 1997 provides that claimants who are entitled to the baby bonus for an income year and required to lodge income tax returns may only claim the baby bonus in their income tax return. The baby bonus is claimed as a refundable tax offset.

Paragraph 61-405(b) of the ITAA 1997 provides that claimants who are not required to lodge income tax returns and who are entitled to the baby bonus may make a claim for the baby bonus in the approved form.

Section 61-410 of the ITAA 1997 states that once a taxpayer entitled to the baby bonus makes a claim that claim cannot be revoked.

In the circumstances here the taxpayer has made an effective choice to claim the baby bonus. This is evidenced by the taxpayer lodging a claim in the approved form in the genuine belief that they were not required to lodge a tax return for the income year. An effective choice for the baby bonus has been made by the taxpayer despite the subsequent need to lodge a tax return. Subsequent events do not affect the validity of the claim if it is effective at the time it is made. Section 61-410 of the ITAA 1997 provides that once an effective claim has been made for the baby bonus, it cannot be revoked.