Issue
Is the taxpayer eligible for the First Child Tax Offset (Baby Bonus) under section 61-355 of the Income Tax Assessment Act 1997 (ITAA 1997) for a child that resides overseas?
Decision
Yes. The taxpayer is eligible for the Baby Bonus under section 61-355 of the ITAA 1997 for a child that resides overseas as the child is in their care.
Facts
The taxpayer's child was born overseas on 24 October 2003.
The taxpayer's child resides overseas with the taxpayer's spouse.
The taxpayer resides in Australia and is an Australian resident.
The taxpayer's child is less than five years old.
The taxpayer has never been legally responsible for any other child.
The taxpayer's spouse was not an Australian resident when the child was born.
The taxpayer provides financial support for the child.
The taxpayer is actively involved in making decisions concerning the child's day-to-day care, welfare and development.
Reasons for Decision
Section 61-355 of the ITAA 1997 provides entitlement to the First Child Tax Offset, known as the Baby Bonus, where certain conditions are met. If a taxpayer meets these conditions, they are taken to have primary entitlement to the Baby Bonus for the child in question at that time.
Subsection 61-355(3) of the ITAA 1997 sets out the conditions which need to be met in order to be eligible to claim the Baby Bonus. Firstly, under paragraph 61-355(3)(a) of the ITAA 1997 a child event must have happened. On the basis of paragraph 61-355(3)(a), a child event has happened in relation to the taxpayer in the present case, but not the taxpayer's spouse.
Secondly paragraph 61-355(3)(b) of the ITAA 1997 states that section 61-365 of the ITAA 1997 (first child only) must not prevent you from having a primary entitlement to the offset for the child. In the present case this condition has been met.
Thirdly, paragraph 61-355(3)(c) of the ITAA 1997 requires at the time of the child event: (i) the child is less than five; and (ii) you are legally responsible for the child; and (iii) the child is in your care; and (iv) you are an Australian resident; and (v) section 61-370 (another carer) does not prevent you from having a primary entitlement to the offset for the child; and (vi) if section 61-375 (selection rules) applies - you are selected by subsection (3) of that section.
In the present case, the taxpayer meets the conditions at subparagraphs 61-355(3)(c)(i), 61-355(3)(c)(ii), 61-355(3)(c)(iv), 61-355(3)(c)(v) and 61-355(3)(c)(vi) of the ITAA 1997.
In relation to subparagraph 61-355(3)(c)(iii) of the ITAA 1997, the view of the Commissioner of the meaning of care is found in Taxation Ruling IT 2337; which deals with the concept of 'sole care'. The term 'sole' is not relevant in relation to the entitlement to the Baby Bonus and does not affect the meaning of the term 'care'. The Commissioner views 'care' to mean having the responsibility for the actual looking after, caring, upbringing, and so on of a child.
In the present case, the taxpayer provides financial support and is actively involved in making decisions concerning the child's day-to-day care, welfare and development despite the child residing overseas. Accordingly, the child is considered to be in the taxpayer's care.
Therefore as the taxpayer has met the conditions in subsection 61-355(3) of the ITAA 1997 including having the child in their care, the taxpayer is eligible for the Baby Bonus under section 61-355 of the ITAA 1997.