Consolidation of dependency tax offsets

Budget Review 2012–13 Index

Les Nielson

The government has proposed to consolidate the following dependency tax offsets (or rebates) into one single offset:

  • invalid spouse
  • spouse/carer spouse
  • housekeeper (and house keeper with child)
  • invalid relative, and
  • parent and parent-in-law.

These tax offsets are only allowed where the taxpayer’s adjusted taxable income, or a couple’s combined adjusted taxable income, is below $150 000 per annum.

Under the proposed changes, these offsets will now only be allowed where the individual concerned is generally unable to work due to carer obligation or disability.

Where a taxpayer could claim two (or more) of the above tax offsets, under the proposed changes they will be able to claim the same number of the new consolidated tax offsets. For example, if a taxpayer could claim both the spouse and invalid relative offsets, under the proposed changes they could also claim the proposed consolidated offset in respect of their spouse and also in respect of their invalid relative.

This new offset will be set at the level of the most generous of the above tax offsets. In 2011–12 this was the dependent spouse rebate with a maximum value of $2355. The budget papers note that this will mean that in some cases the person claiming the rebate will receive additional after tax income.[1]

This measure was first put forward in the Australia’s Future Tax System report (the Henry Review) to reduce tax system complexity.[2] This proposed measure is projected to increase revenue by about $70m over the forward estimates period.[3]

Reaction

As at the date of writing there no reaction to this proposed change.



[1].       Australian Government, Budget measures: budget paper no. 2: 2012–13, Commonwealth of Australia, Canberra, 2012, p. 35, viewed 14 May 2012.

[2].       Dr Ken Henry (Chair), Australia’s Future Tax System – List of Recommendations, Canberra, 2010, p. 81, viewed 14 May 2012.

[3].       Budget Paper no. 2, op. cit.

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