Consolidated dependant (invalid and carer) tax offset

The consolidated dependant tax offset was introduced in the 2012-13 federal budget in May, and combines and consolidates eight of the existing dependency tax offsets into one single non-refundable tax offset for taxpayers who contribute to the maintenance of someone who is genuinely unable to work because of invalidity or care obligations.

The offsets that have been consolidated are the invalid spouse, carer spouse, housekeeper, housekeeper (with child), child housekeeper, child housekeeper (with child), invalid relative and parent/parent-in-law tax offsets.

Taxpayers who were eligible to receive more than one dependency offset amount in respect of multiple dependants who are genuinely unable to work will be able to receive more than one amount of the consolidated dependant tax offset in respect of these dependants (however see “Other entitlements” on the next page). Note that in the rare cases of having multiple spouses during an income year, more than one full offset cannot be claimed.

However, a number of eligibility requirements must be met before a taxpayer can make a claim for the dependant tax offset.

These requirements include:

  • maintenance of a dependant
  • eligibility of the dependant (including residency requirements of both the taxpayer and the dependant)
  • invalidity or carer obligations
  • income requirements, and
  • must not be in receipt of other entitlements (or not eligible for other entitlements in some cases).

Maintenance

A taxpayer may satisfy this requirement for an income year if, during the year, they contribute to the maintenance of an eligible dependant. Determining whether a taxpayer has contributed to a dependant is open to interpretation. However it is generally accepted that if a taxpayer resides with a dependant, it will be generally accepted that they have contributed to their maintenance.

Eligible dependant

An eligible dependant of a taxpayer includes their:

  • spouse
  • parent
  • child (aged 16 years or over)
  • brother or sister (aged 16 years or over)
  • spouse’s parent, and
  • spouse’s sibling (aged 16 years or over).

The above listed dependants are only eligible if they are:

  • genuinely unable to work due to invalidity or carer obligations, and
  • Australian residents (see below for an exception to this general rule).

Note however that a taxpayer can still claim the tax offset for a foreign resident spouse or child if the taxpayer is domiciled in Australia.

Invalidity or carer obligations

A dependant is seen to be genuinely unable to work due to invalidity where the person receives a disability support pension or a special needs disability support pension under the Social Security Act 1991. Alternatively this test can be passed if the dependant receives an invalidity support pension under the Veterans’ Entitlement Act 1986.

A dependant is genuinely unable to work because of a carer obligation if they:

  • receive a carer payment or carer allowance under the Social Security Act 1991, or
  • are wholly engaged in providing care to a relative who receives one of the following entitlements:
    • a disability support pension or a special needs disability pension under the Social Security Act 1991, or
    • an invalidity service pension under the Veterans’ Entitlements Act 1986.

Income requirements

The income threshold rules for the new consolidated Dependant (Invalid and Carer) Tax Offset for the 2012-13 year are as per the table below.

The definition of income used for the purposes of the income limit eligibility cap for the dependant tax offset will be aligned with that which applies to family assistance payments for Family Tax Benefit Part B, which is currently $150,000 (this is updated every year on July 1). Adjusted taxable income will be used to determine whether a taxpayer passes this income test.

 

Income threshold rules for the new consolidated Dependant (Invalid and Carer) Tax Offset 2012-13 
Eligibility income threshold requirement for taxpayer The taxpayer’s and his/her spouse’s combined adjusted taxable income is $150,000 or less*
Dependant’s income threshold requirement Dependant’s adjusted taxable income is below the cut-out point (less than $9,974 for 2013). For full rebate income is $282
* Ask this office how to determine your adjusted taxable income.

 

Other entitlements

A taxpayer is not entitled to a Dependant (Invalid and Carer) Tax Offset to the extent that they or their spouse received Family Tax Benefit (FTB) Part B (without shared care). If the couple received FTB Part B with shared care, the offset is reduced for the shared care percentage a taxpayer receives.

A taxpayer entitled to a zone, overseas forces or overseas civilian offset is not entitled to a Dependant (Invalid and Carer) Tax Offset. However, note that where a spouse is born before July 1, 1952 the taxpayer is entitled to the former Dependant Spouse Tax Offset rather than the new dependant tax offset.

It is also important to note that some of the previous dependant tax offsets have been “notionally” retained (retained only to help work out other offsets). They are used purely for the purposes of calculating zone or overseas forces offsets. Ask this office if your circumstances put you in this position.