Case M78
Judges:KP Brady Ch
LC Voumard M
JE Stewart M
Court:
No. 2 Board of Review
K.P. Brady (Chairman); L.C. Voumard and J.E. Stewart (Members)
The objection before the Board of Review in this reference poses for our examination those provisions
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of the Income Tax Assessment Act dealing with the sole parent rebate.2. The taxpayer concerned is a South Vietnamese woman who was resident in Saigon until April 1975. Upon the fall of the South Vietnamese Government in that month she escaped with other refugees to the U.S.A. and thence came to Australia in January 1976. She now regards Australia as her permanent home, and for the purposes of the Act she was a resident of Australia for the year of income under review, viz. that year ended on 30 June 1978.
3. She married a fellow Vietnamese on 29 January 1970, and one child, a son (the taxpayer's only child), was born of the marriage on 22 December 1970. The marriage, however, was of short duration, the parties separating in May 1973.
4. The taxpayer made application for the dissolution of her marriage in July 1977. The decree nisi was made absolute on 19 January 1979. Accordingly, the taxpayer was lawfully married for the whole of the year of income ended 30 June 1978.
5. At some time prior to the year of income, the taxpayer entered into a de facto arrangement with an ex-Vietnamese countryman, and that relationship existed throughout the whole of the year of income, and still continues to exist.
6. The matter comes before this Board arising from the Commissioner's disallowance, in an amended assessment, of the taxpayer's claim for the sole parent rebate provided by sec. 159K. The Commissioner contends that the taxpayer did not have the sole care of her son in accordance with sec. 159K(1) and that there existed no special circumstances so as to allow a rebate under sec. 159K(3).
7. Section 159K is a relatively new provision having been enacted as part of Subdiv. A of Div. 17 in 1975 when a system of concessional rebates was introduced in substitution for that system of concessional deductions which had been in operation for over 25 years. The section provides a rebate to a taxpayer, male or female, who is a parent without a partner and is maintaining either a child under 16 years of age or a student up to 25 years of age. The taxpayer must have the sole care of that child or student. It would seem that the provision was introduced primarily for the benefit of single, widowed or divorced parents caring for a child without the aid of a daughter/housekeeper or housekeeper.
8. The parts of sec. 159K which are relevant to the case before us are as follows:
``(1) Where, during the whole of the year of income, a taxpayer has the sole care of a dependant or dependants included in class 3 or class 4 in the table in sub-section
(2) of section 159J, being a dependant or dependants in respect of whom he would be entitled to a rebate of tax under that section in his assessment in respect of income of the year of income but for sub-section (1A) of that section, he is entitled, subject to sub-section (3), to a rebate of tax, in his assessment in respect of income of that year of income, of -
- (a) if he is not entitled, in respect of the year of income, to a rebate of tax under section 159J in respect of a spouse or daughter-housekeeper or under section 159L in respect of a housekeeper - an amount of $350; and
- (b) if he is entitled to a rebate of tax under section 159J in respect of a daughter-housekeeper, or under section 159L in respect of a housekeeper, in respect of a period that is part of the year of income, or the taxpayer contributed during a period that is part of the year of income, to the maintenance of his spouse - an amount of $350 less an amount that bears to $350 the same proportion as the number of days in that period (or, if there is more than one such period, in those periods) bears to 365.
(2)...
(3) Where the taxpayer is the spouse of another person during the whole or part of the year of income -
- (a) the taxpayer is not entitled to a rebate under this section in respect of that year of income unless the Commissioner is of the opinion that, because of special circumstances, it is just to allow a rebate; and
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- (b) the rebate (if any) shall be such amount not exceeding $350 as, in the opinion of the Commissioner, is reasonable in the circumstances.
(4) Where, during any period, a man and a woman have lived together as husband and wife on a bona fide domestic basis although they were not legally married to each other, this section applies in relation to each of them as if they were legally married to each other during that period.''
9. The dependants referred to in classes 3 and 4 of sec. 159J comprise a child less than 16 years of age (not being a student), and a student. ``Student'' is defined in sec. 159J(6) as meaning a person who is less than 25 years of age and is receiving full-time education at a school, college or university. ``Child'' has no special definition for the purposes of sec. 159J. Accordingly, the definition contained in sec. 6(1) operates, viz.: ```child' in relation to a person includes an adopted child, a step-child or an ex-nuptial child of that person''.
10. In its original form, entitlement to a sec. 159K sole parent rebate was conditional upon the taxpayer being entitled to a dependant's rebate under sec. 159J in respect of a child under 16 or a student up to 25 years of age, as well as meeting the requirements of the section itself of first having sole care of the dependant and secondly as a normal circumstance, being unmarried (the word covering widowed and divorced taxpayers as well as those taxpayers who are single parents).
11. However, rebates for children under 16 and students were withdrawn by amending legislation as from the year of income ended 30 June 1976, but by consequential amendment to sec. 159K(1), those rebates were in effect treated as if they still existed for the purpose of determining entitlement to the sole parent rebate (and various other rebates).
12. Whilst all of the provisions of Subdiv. A of Div. 17 dealing with concessional rebates have always been restricted to individual taxpayers who are residents of Australia (refer sec. 159H(1)), no such requirement was made of the dependant until amending legislation was passed with effect from 1 November 1978. Accordingly, as from that date concessional rebates are only available when both the taxpayer and the dependant are residents of Australia.
13. In the instant case the taxpayer was a resident of Australia and contributed to the maintenance of her son, then aged 7, in the year of income under review. In accordance with sec. 159J(1), it can be said that he (the child) was a dependant for the purpose of the taxpayer securing the sole parent rebate.
14. There is no evidence to suggest that the taxpayer contributed to the maintenance of her husband, since remarried (and still living in Vietnam), nor did she employ a housekeeper to assist her in keeping house and in caring for her child. Accordingly, the full amount of the rebate is available to her if she can demonstrate that she had the sole care of her son during the year of income under review and, though married, special circumstances existed so as to warrant the Commissioner forming the opinion that it was just to allow her the rebate.
15. It seems clear that the child's father did not have anything to do with his wife or child after they left Vietnam. In the taxpayer's application for dissolution of the marriage dated 19 July 1977, she stated in answer to the question requesting the circumstances in which the parties last separated:
``The marital relationship deteriorated in the twelve months prior to separation leading to frequent arguments.''
Subsequently in the same document, she stated that she left her husband on 10 May 1973.
16. Her application for dissolution also contained the following proposed arrangements for the welfare of her child:
``(1) That he remain in the custody of the applicant.
(2) That he continue to reside with the applicant at...
(3) That he be supervised by the applicant.
(4) That he be maintained from the income of the applicant.
(5) That he be educated at State Schools to the limit of his ability and the means of the applicant to provide for his education.''
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17. The decree nisi dated 18 December 1978, made absolute on 19 January 1979, stated:
``The Court declared that it was satisfied under sec. 63 of the Family Law Act that... is the only child of the marriage who has not obtained the age of 18 years, and that proper arrangements have been made for his welfare.''
18. Accordingly, the taxpayer was given the sole custody of the child by decree of the Family Court.
19. However, this need not amount to ``sole care'' as prescribed by sec. 159K(1). The words ``sole care'' are not defined in the Act and must therefore be given the meaning they bear in normal usage. Of some assistance is the meaning contained in the Concise Oxford Dictionary of ``exclusive charge''.
20. It seems to us that care of a child can be delegated by a parent to others, certainly on a temporary basis, and if we examine one typical day of a child attending school we would consider that the driver of the school bus owed a duty of care to that child whilst on his bus, that the traffic officer at the pedestrian crossing owed a duty of care to the child whilst under his supervision at the crossing, and that the school authority also had a duty of care whilst the child was on the school premises (refer
Geyer v. Downs & Anor. (1978) 52 A.L.J.R. 142). The distinguishing aspect of ``sole care'' as distinct from the degree of care due from those to whom care is given on a temporary basis must therefore, we consider, relate to ultimate and exclusive responsibility for providing care to the child. In other words, we consider that ``sole care'' vests in that person who has the full and unshared responsibility for making decisions on a day-to-day basis as to the child's upbringing and welfare, whether it be the food that he eats, the clothes that he wears or the school that he attends.
21. The concept of sole care was examined by the No. 1 Board of Review recently in a hearing cited as Case M43,
80 ATC 304. In that case an unmarried mother gave birth to a son in Europe in 1962. Some two years later she migrated to Australia leaving her child with her parents. Periodically she sent moneys to her parents for his maintenance, and she visited him on return trips to Europe on four separate occasions over the years 1964 to 1979. There, it was held, that other than during the times when she visited her child, it was her parents, i.e. the child's grandparents, who had the sole care even though she had some measure of control through being able to give directions to her parents by telephone and by correspondence. With respect, we would agree with that Board's decision, on the basis that it was the grandparents who had the exclusive responsibility on a day-to-day basis for making decisions as to the child's upbringing, with the control exercised by the mother being so tenuous as not to amount to control at all.
22. In the submission made before us by the taxpayer, we were advised that she had entered into a de facto relationship which continued throughout the year of income under review. In such a situation, it is possible that the de facto partner may have assumed some of the responsibilities of a husband and father and even become ostensible head of the household. For instance, we were informed that he paid $40 per week towards meeting the normal household bills and $20 per week towards running a car. Also, the taxpayer and her partner had purchased a home in their joint names (and had subsequently sold it), and were presently paying off their current home, again in their joint names. However, whilst the de facto partner may have provided for the child (although this matter was contested by the taxpayer), we consider that the maintenance payments which he made and the relationship which he had with the child did not cut across the taxpayer's ultimate responsibility (which she apparently accepted) for the child's upbringing and welfare. We therefore consider that she had the sole care of the child as required by sec. 159K(1).
23. Entitlement to the sole parent rebate, however, is only available to a married person if the Commissioner considers that there are special circumstances which render it just to allow it.
24. The word ``just'' has been judicially considered on a number of occasions, and the dictum of Lukin J. at pp. 84 and 86 in
Loxton v. Evan (1921) St. R. Qd. 79 seems
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relevant in the context in which the word is used in sec. 159K(3). He stated:``What is required is that the decision shall be just, which I take to mean that the decision shall be right and fair, having reasonable and adequate grounds to support it, well founded and conformable to a standard of what is proper and right.''
25. The same words of limitation allowing a housekeeper rebate to a taxpayer who is married, viz. ``unless the Commissioner is of the opinion that, because of special circumstances, it is just to allow a rebate'', are to be found in sec. 159L(4) of the Act.
26. Section 159L, which was substituted in 1975 for repealed sec. 82D in the Income Tax Assessment Act 1936-1974, provides for a rebate for a housekeeper where that person is caring for (i) a child of the taxpayer less than 16 years of age, (ii) a dependent child or invalid relative properly categorised as such for the purposes of sec. 159J, or (iii) a spouse being a recipient of an invalid pension. Additionally, as provided by subsec. (4) of sec. 159L, the Commissioner is authorised to allow a rebate to a taxpayer who is married with the spouse not being in receipt of an invalid pension, when, because of special circumstances, it is just to do so.
27. The matter of a housekeeper rebate producing a just result was examined by the No. 1 Board of Review in a case cited as Case E41,
5 T.B.R.D. 246, and there the Chairman, with whom Mr. A.C. Leslie (Member) was in agreement, stated at p. 248 as follows:
``Where, however, as in the present case, a husband and wife occupying the one marital establishment have voluntarily placed themselves in the position of requiring a housekeeper to tend for the home and their infant child in order that they may both follow income-producing pursuits during the ordinary working week, and where further there can be no question of hardship if the concessional deduction is denied, I am clearly of the opinion that the circumstances, whether they be special or not, would not justify the Board in allowing the taxpayer the deduction she seeks.''
The third Member, Mr. F.C. Beck, agreed to the extent of considering that financial hardship or desertion by a spouse were not the sole criteria by which a claim should be considered just.
28. In a later case involving the merits of a claim for concessional deduction for a housekeeper under sec. 82D (since repealed), this Board, as then constituted, said at p. 164 of Case P36,
14 T.B.R.D. 162:
``Moreover no great emphasis needs to be placed on the word `special' for the allowance of the deduction must also be `just'. In our view it must be just not only between the taxpayer and the revenue but also between the taxpayer and the taxpaying community in general.''
29. In our view, considerations as to what is just are inextricably bound up with those matters which might constitute special circumstances. Again quoting from Case P36 (supra):
``The general rule is that a taxpayer who is married does not receive a deduction for any housekeeper engaged by him. Thus any circumstances which render it just to allow the deduction must by reason of their nature be unusual or exceptional and thus `special'.''
30. In the case now before us, the Commissioner considered that no special circumstances appertained so as to cause him to form the opinion that it would be just to allow a deduction to the taxpayer, and it remains for this Board, pursuant to the powers conferred on it by sec. 193(1) of the Act, to substitute its opinion for that of the Commissioner if considered proper to do so.
31. No definition of ``special circumstances'' is to be found in sec. 159K, but we are assisted in our examination by a reading of subsec. (4) which provides that a man and woman living together as husband and wife on a bona fide domestic basis, though not legally married, are to be treated for the purposes of the section as if they are legally married.
32. With this provision in mind, we consider that the intent of the Legislature in enacting sec. 159K was essentially to provide a rebate to the sole parent taxpayer to assist in maintaining a child where there is an absence of the human supportive role and financial assistance normally forthcoming from the other partner, either because the
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taxpayer is widowed or divorced, or because the taxpayer has not married.33. Augmenting these considerations, and to cover the situation where the taxpayer is married but for various reasons the human solace and financial help engendered through the normal husband/wife relationship are non-existent, for example, the partner may be deserted by the other, the Legislature reposes a discretion in the Commissioner to allow the rebate to a taxpayer having a spouse but perhaps in name only, so that the taxpayer obtains at least some taxation relief in the sole maintenance of the child. (It is worth nothing that the word ``spouse'' is not defined in the Act but it does not include a de facto wife or husband, refer Case S37,
17 T.B.R.D. p. 203.)
34. Finally, to provide for the situation where the resources both human and financial are present to maintain the child, although the taxpayer is unmarried, through the taxpayer and partner living together on a bona fide domestic basis, the Legislature permits the Commissioner to take such aspects into account in exercising his discretion under sec. 159K(3) through equating this relationship with marriage.
35. In the case before us, we consider that the taxpayer and partner lived together as husband and wife on a bona fide domestic basis although not legally married to each other. The relationship seems to be a stable one having existed for some years. We were told that the taxpayer entered it on the understanding that it would be followed by marriage, although this has not yet occurred.
36. The de facto partner contributed to the maintenance of the household and he also paid for the running costs of a car which, presumably, was used by the taxpayer and her son.
37. They entered into real estate transactions in their joint names, and in the year of income under review they were making repayments of a loan obtained in their joint names from a joint bank account into which their separate salaries and wages were regularly deposited.
38. The taxpayer stated that the de facto partner was not interested in her child. This statement was sought to be supported by a statutory declaration from the de facto spouse affirming that he took no responsibility for the financial cost of caring for the child and in fact his contributions to the household were solely for his own sustenance.
39. However, no heed may be taken by the Board to this declaration as reg. 37(1)(b) precludes its receipt as evidence, being a document which has been brought into existence solely for the purpose of the review.
40. In any event, it is worth noting that the taxpayer did not call her de facto partner as a witness, presumably on the basis that his evidence would not have assisted her case.
41. For the reasons given above, we consider that the taxpayer and her de facto spouse lived together as husband and wife on a bona fide domestic basis during the year of income under review and that a measure of human as well as financial support stemmed from that relationship, so that no special circumstances appertained to render it just to allow the rebate.
42. We would accordingly uphold the Commissioner's decision on the objection and confirm the amended assessment.
Claim disallowed
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