Private ruling: Zone tax offset
Published: October 2014
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2012

Ruling: Q1: Are your spouse and children considered to be your dependants for zone offset purposes for the period from when you arrived in Australia until they permanently move to Australia? | A1: No.

Relevant facts and circumstances: You entered Australia on a temporary work. Your spouse and children remained in the Country A. Your employer sent you to work on a two weeks on and one week off roster at a location which for zone offset purposes is located in ordinary zone B. You lodged a visa application and you and your family were all granted a permanent residency visa. It was a requirement of the visa that your family made their first entry into Australia by a certain date. They arrived before this date and returned to Country A shortly after. You have been saving for a deposit to purchase your own home and intend to purchase a home before your family returns to Australia. You regularly transfer money to Country A for your family's food, clothing and lodging. Your family has resided with family members since you arrived in Australia. You are in the process of purchasing a house in Country A for your family to reside in. You will retain the residence as a holiday home once your family moves to Australia permanently.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 6(1) | Income Tax Assessment Act 1936 Section 159J(1) | Income Tax Assessment Act 1936 Section 159J(3A) | Income Tax Assessment Act 1936 Section 79A

Reasons for decision: Summary: Subsection 159J(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a taxpayer is entitled to a tax offset where, during the year of income, they contributed to the maintenance of a spouse who is a resident of Australia. A 'resident' or 'resident of Australia' is defined in subsection 6(1) of the ITAA 1936, and includes a person who resides in Australia, or whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia. Subsection 159J(3A) of the ITAA 1936 provides that, in applying the definition of resident in subsection 6(1) of the ITAA 1936, for the purposes of the dependant spouse tax offset, the dependant spouse of a taxpayer will be taken to have the same domicile as the taxpayer when the taxpayer has a domicile in Australia. The taxpayer's spouse is therefore deemed to have a domicile in Australia for the purposes of the definition of resident in subsection 6(1) of the ITAA 1936, and will be considered a resident of Australia unless the Commissioner is satisfied that their permanent place of abode is outside Australia. The leading case on permanent place of abode is Federal Commissioner of Taxation v. Applegate [1979] FCA 66; 79 ATC 4307; (1979) 9 ATR 899. The Federal Court stated that in respect of the definition of 'resident', a permanent place of abode does not have to be everlasting or forever but it is rather used in contrast to temporary or transitory. Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia (IT 2650) also considers residency and permanent place of abode outside Australia. Paragraph 12 of IT 2650 states that 'place of abode' refers to a person's residence, where one lives with one's family and sleeps at night. In essence, a person's 'place of abode' is that person's dwelling place or the physical surroundings in which a person lives. Where a taxpayer's family remains overseas, the spouse is not considered to have a permanent place of abode outside Australia if the spouse has taken timely and appropriate steps to migrate to Australia. While the taxpayer's spouse is currently living overseas and therefore has a current 'place of abode' overseas, this may only be a temporary arrangement. Where their application has been made in a timely and appropriate manner and the spouse and children join the taxpayer once the immigration application has been approved, the Commissioner accepts that the taxpayer's spouse does not have a permanent place of abode outside of Australia. In your situation you arrived in Australia several years ago and you have recently applied for a visa. The visa was approved and your family travelled to Australia for a short period of time. Your family then returned to Country A and you do not expect them to return to Australia until you have purchased your own home. When in Country A your family has lived with family members but you are currently in the process of buying a home in Country A for your family to live in. Once your family moves to Australia you will retain this home to use as a holiday house. It is considered that, even though you have secured a visa for your family, your spouse has a permanent place of abode outside Australia. Your circumstances are different to those mentioned in ATOID 2003/405 as you are purchasing a home for your family to live in in Country A and your family is not intending to move to Australia until you purchase a home in Australia. Consequently your family are not residents of Australia and you are not entitled include any claim for your family in your calculation of the zone tax offset.