House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer,the Hon Peter Costello)

Chapter 5 What if a child is a dependant for part of only a year?

5.1 This chapter covers:

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the determination of FTA benefits where a taxpayer has a dependant for only part of the year.

Part year dependancy

5.2 A child may be a dependant of a person for only a part of a year of income. The usual examples where this would be the case are:

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the child is born during the year;

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for a child at school, the child leaves school or turns 18 during the year;

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for a child not at school, the child turns 16 during the year;

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the child is subject to shared care arrangements and section 20L applies.

5.3 Where a child is a dependant of a person for only part of a year of income, FTA benefits are pro-rated according to the proportion of the number of days that the child was a dependant to the number of days in the relevant period [sections 20S and 20T] . The number of days in the relevant period is 365, except for the 1996-97 income year, in which case the number of days in the relevant period is 181 (that is, from 1 January 1997 to 30 June 1997).

5.4 Where an amount worked out under the pro-rating is an amount of dollars and cents, the amount is rounded up to the next whole dollar [subsections 20S(4) and 20T(4)]

EXAMPLE 1

Joe and Irene's first child is born on 28 March. Because Irene was not working before the birth, Joe qualifies for a Part B benefit under section 20D, as well as a Part A benefit under section 20D. The FTA benefits would be pro-rated as follows:

Part A benefit (95/365) * $1000 = $260.27, rounded up to $261


Part B benefit (95/365) * $2500 = $650.68, rounded up to $651


(95 days is the period from 28 March to 30 June inclusive)

Total FTA benefit is $912.

EXAMPLE 2

As per example 1, except Joe and Irene also have a child who is not at school who turns 16 on 8 November. Accordingly, Joe also has a Part A benefit for the year. The FTA benefits would be allocated as follows:

Part A benefit (225/365) x $1000 = $616.43, rounded up to $617


(225 days is the sum of the periods 1 July to 7 November and 28 March to 30 June inclusive)

Part B benefit (95/365) x $2500 = $650.68, rounded up to $651


Total FTA benefit is $1268.