Urquhart and Commissioner of Taxation (Taxation)

[2025] ARTA 2267

Urquhart and Commissioner of Taxation (Taxation) [2025] ARTA 2267 (24 October 2025)

Applicant/s:  Linc Urquhart

Respondent:  Commissioner of Taxation  

Tribunal Number:                2024/5266 

Tribunal:  General Member L McBride    

Place:  Sydney

Date:24 October 2025

Decision:The Tribunal affirms the decision under review.

.....................[SGD]...........................

General Member L McBride

Catchwords

TAXATION - income tax assessment; entitlement to Dependant (invalid and carer) tax offset, statutory construction, whether justification for departing from literal interpretation, no error in application of the statutory requirements, decision under review affirmed.

Legislation
Administrative Review Tribunal Act 2024 (Cth)
Income Tax Assessment Act 1997 (Cth) ss. 61-5, 61-30, 61-(10)(1)(b), 61(10)(1)(c),61-10(2),(a) and (b), 61-30, 61-35, 61-40, 61-45
Taxation Administration Act 1953 (Cth)
Social Services Consolidation Act 1947 (Cth)
Social Services Act 1975 (Cth)

Taxation Laws (Amendment) Act 1975 (Cth)

National Disability Scheme Act 2013 (Cth) s 24

Cases

Guillaume v Commissioner of Taxation [2015] AATA 83
Frederik Schlmeier and the Commissioner of Taxation [2015] AATA 13
Momcilovic v the Queen (2011) 245 CLR 1
Cooper Brookes (Wollongong) Pty Ltdv Commissioner of Taxation (1981) 147 CLR 297 Esso Australia Pty Ltd v Australian Workers’ Union [2017] HCA 54
Western Australia v Commonwealth (1975) 134 CLR 201
H Lundbeck A/S v Sandoz Pty Ltd (2022) 276 CLR 170

Mondelez Australia Pty Ltd v Automative, Foods, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29

Marshall v Watson (1972) 123 CLR 640

Secondary Materials

The Explanatory Memorandum – Taxation Laws (Amendment) Act 1975

Australia’s Future Tax System – Report to the Treasurer * December 2009 

Statement of Reasons

1. This is an application for review of an objection decision made by the Respondent under subsection 14ZZK of the Taxation Administration Act 1953 (Cth).

2. The issue in dispute is whether the Applicant is entitled to claim the Dependant (Invalid and Carer) tax offset (“the Offset”) under s 61-10 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) for the income year ended 30 June 2022.

3. By decision dated 6 May 2024, the Respondent disallowed the Applicant’s Objection to the Amended Notice of Assessment for the year ended 30 June 2022.

4. A taxpayer is eligible for the Offset under the ITAA 1997 if:

   (a)he or she contributes to the maintenance of an eligible dependant;

   (b)the eligible dependant receives an eligible pension, allowance, or payment;

   (c)he or she does not receive a disqualifying payment; and

   (d)his or her income does not exceed the income limit for the Family Tax Benefit (emphasis added).

5. The maximum annual offset amount relating to maintenance contributions for any individual Australian resident was $2,816 in the income year ended 30 June 2022[1]. A taxpayer’s actual offset entitlement depends partly on the period during which the taxpayer contributed to the dependant’s maintenance, and partly on the dependant’s “adjusted taxable income for offsets”. The reduction amount is approximately 25% of the dependant’s “adjusted taxable income for offsets” after an initial reduction of $282[2]:  As Senior Member Taylor SC stated in Fredrick Schlmeier and the Commissioner of Taxation[3]:

   “As a matter of arithmetic, if a dependant’s “adjusted taxable income for offsets”, which includes among other things payments under the Disability Support Pension, is at least about $9,974, the required reduction will exceed the maximum permissible annual offset amount.”

   [1] S.61-30 ITAA 1997.

   [2] see ITAA 1997 s 61-45(a).

   [3] [2015] AATA 13 at [4].

6. The Respondent relied on s 14ZZK(b) and put the Applicant to proof of all facts upon which the Applicant sought to establish that the decision under review should have been made differently.

7. There was no evidence before the Tribunal to establish the Applicant’s spouse, Mrs Urquhart, was in receipt of a Disability Support Pension (DSP) for part of the year of income ended 20 June 2022, notwithstanding a statement in the Applicant’s Facts, Issues and Contentions that the Applicant’s spouse had received DSP payments until the 24 September 2021, which is an 89 day period in the income tax year ended 30 June 2022.

8. The Tribunal notes the Respondent, in the Objection Decision, stated that it had considered Mrs Urquhart’s lodged income tax return for the year ended 30 June 2022[4] and was satisfied that Mrs Urquhart was not in receipt of any DSP payments in the relevant income tax year.

   [4] Respondents Reasons for Decision TB Tab 1-14 at [20].

9. To assuage any regret the Applicant may have for neglecting to provide evidence of Centrelink DSP’s payments until September 2021 to support the Applicant’s assertion[5], the Tribunal notes the mathematical calculation required when an adjustment is made under s61-45. It is extremely doubtful receipt of a DSP payment for 89 days would have made any difference to the outcome. It was more likely than not the required reduction would have exceeded the reduced and further reduced maximum permissible annual offset amount.

   [5] Applicants Statement of Fact’s Issues and Contentions TB Tab 4- 128 at [24].

   BACKGROUND

10. The Applicant is a high school teacher.

11. The Applicant’s spouse, Mrs Harli Urquhart, suffers from a physical disability, and it was not disputed that Mrs Urquhart is incapacitated and “genuinely unable to work”.

12. During the year ended 30 June 2022, the Applicant maintained his spouse.

13. The Applicant stated in his Statement of Facts, Issues and Contentions that until 24 September 2021, an 85-day period, Mrs Urquhart received a Disability Support Pension (DPS) from Centrelink.  24 September 2021 falls within the 2021- 2022 financial year.[6]

    [6] TB Tab 4 -128 at 24].

14. The Respondent stated in its Statement of Facts, Issues and Contentions, that until 2021, the Applicant’s spouse received a DSP from Centrelink but did not receive a DSP in the 2022 income year[7].

    [7] TB Tab 3-199 at [15].

15. The Respondent put the Applicant to proof of all facts the Applicant sought to rely on to establish the decision under review should have been made differently[8]. The Applicant did not provide any evidence establishing that the Applicant’s spouse had received DSP payments from Centrelink until 24 September 2021.

    [8] Respondents Statement of Facts, Issues and Contentions TB Tab -117 at [4].

16. On 13 September 2022, the Applicant lodged his income tax return, claiming a Dependant (Invalid and Carer) tax offset in the amount of $2,833 as part of his tax offsets[9]

    [9] Tribunal Document (T) T3.

17. On 11 October 2022, the Respondent adjusted the claimed $2,833 to nil as a result of an audit and issued a Notice of Amended Assessment.  

18. The Applicant requested a private ruling on 14 October 2023. Among other things, the Applicant contended that:

    (a)   his “spouse is genuinely unable to work due to invalidity and is eligible for a Disability Support Pension (DSP) but does not receive it because the Applicant's gross income exceeds the exclusionary threshold for Centrelink”.

    (b)  “The ‘requirement’ to receive a DSP is a test of genuine inability to work, rather than a strict requirement. The test is satisfied in this case, despite no payment being received.

    (c)   The Tax and Superannuation Laws Amendment (2013 Measures No.2) Bill 2013 - Explanatory Memorandum (EM) confirms that the DPS ”requirement’ is a mechanism to establish invalidity, not a mandatory condition”.

    (d)  Subdivision 61-102 must be read in conjunction with the explanatory memorandum and report to the Treasurer to apply the law as it was intended, to the eligibility of the Dependant (Invalid and Carer) Tax Offset (DICTO)”.

19. The Applicant expanded on the above submissions in the Applicant’s Statement of Facts, Issues and Contentions[10] as follows:

    (e)  “…the statutory use of ‘if’ in subsection 61-10(2)(a) of the ITAA 1997 introduces a sufficient condition rather than an exclusive requirement.” The Applicant’s submission was “that the absence of restrictive terms such as “only if” suggests alternative methods of proving an inability to work. Analysis of the ITAA 1997 and related legislative framework documents shows exclusionary terms are used elsewhere but not in subsection 61-10(2)(a) implying intent to allow broader eligibility criteria”.

    (f)    The ordinary definition of “if” introduced a conditional clause; on the condition or supposition that; in the event that….”

    [10] TB  Tab 7 – 285 at [19] and [20]

20. In the Applicant’s Statement of Facts, Issues and Contentions, the Applicant supported his eligibility to receive the Offset by relying on the EM, which states that “a dependent is considered to be genuinely unable to work due to invalidity where that person receives a disability support pension or similar qualifying payment”[11]. The Applicant contended that statement: “better reflects the intention of the Report to the Treasurer and appears to allow more flexibility in interpreting and applying eligibility rules” and highlights the Applicant’s contention that this detailed explanation of the new law is explaining ‘a test of genuine invalidity’ rather than a concrete “requirement”.[12]  (emphasis added)

    [11] Tax and Superannuation Laws Amendment (2013 Measures No.2) Bill 2013 - Explanatory Memorandum chapter 1.30

    [12] Applicants Statement of Facts, Issues and Contentions – Tab 4- 131.

21. The Applicant further contended that the Respondent had incorrectly applied the legislation and that the objection decision had been made with an “overly narrow consideration of the legislative framework that unjustly excludes certain taxpayers maintaining dependants genuinely unable to work”.[13]

    [13] TB Tab 4 – 133.

22. As a result of the private ruling request, the Respondent provided the Applicant with general guidance relating to the DICTO and advised the Applicant to file an objection to the Respondent’s decision.[14]

    [14] T 8-62.

23. The Applicant lodged a Notice of Objection on 27 November 2023, attaching evidence of a Carer Allowance payment received from Centrelink, as well as a copy of the EM.

    Statutory Construction

24. The central focus of the dispute between the parties was the operation of subsection 61- 10 (2) of the ITAA 1997, which is in the following terms:

    “61(2) the other individual meets the requirements of this subsection if he or she is being paid:

    (a)  a disability support pension or a special needs disability support pension under the Social Security Act 1991; or

    (b)  an invalidity service pension under the Veteran’s Entitlement Act 1986” (Emphasis added).

    Applicant’s contention

25. The Applicant contended that Mrs Urquhart met the eligibility criteria for the Offset for the financial year ending 30 June 2022, based on the legislative intent and framework.

26. A DSP) paid by Centrelink is designed for people with a permanent physical, intellectual, or psychiatric condition that prevents them from working. It is intended to provide long-term support for people who have a permanent medical condition.  Mrs Urquhart clearly met the medical criteria. However, eligibility for a DSP also requires the Applicant to meet non-medical criteria, which is the income and assets test.

27. On 24th of September 2021, Centrelink advised Mrs Urquhart that her DSP had been cancelled because the Applicant's gross income exceeded the exclusionary threshold, a disqualifying event. The Applicant contended that the following material, which the Applicant submitted to the Respondent, demonstrated that, when designing the Income Tax Offset, Treasury’s ‘intent’ was genuine invalidity, not the strict requirement that the Applicant spouse be in receipt of a pension under either the Social Security Act 1991 or the Veteran’s Entitlement Act 1986[15]. The Applicant relied on the following legislation:

    (a)  Income Tax Assessment Act (No.2) 1975 (Cth), (An Act to Amend the Law Relating to Income Tax)

    (b)  Social Services Consolidation Act 1947 (No.26 of of 1947) (Cth)

    (c)   an extract from- Australia's Future Tax System, Report to the Treasurer (December 2009) p 87

    (d)  Income Tax Assessment Act 1997 (Cth) section 13.1

    [15] Applicants Statement of Facts, Issues and Contention TB Tab 4- 130 [27],-[36].

28. The Applicant relied on the fact that he had received a Care Allowance under the Social Security Act 1991 in 2022 in support of the his argument that Mrs Urquhart was genuinely unable to work and was therefore “eligible for a DSP but does not receive it because the Applicants gross income exceeds the exclusionary threshold for Centrelink”[16]. 

    [16] Ibid – 126 at (g).

29. The essence of the Applicant’s argument was that the correct test was genuine inability to work and that the test was satisfied despite Mrs Urquhart not being in receipt of a DSP. In support of this position, the Applicant contended that “the Explanatory Memorandum confirms that the DSP requirement is a mechanism to establish invalidity, not a mandatory condition.”[17]

    [17] Ibid at 126 (i).

30. For clarity, a Carer Allowance under the Social Security Act 1991 is a flat rate fortnightly payment made to the carer to assist with the additional costs of caring for a person with a disability. It is not designed to replace income; it is a supplementary, non-taxable payment. In contrast, a DSP is an income support payment (pension) designed as an income replacement and is paid to the person with the disability. Eligibility is based on medical condition, ability to work, residency and satisfying the income and assets test.

31. In relation to the income test, the Applicant contended that the correct test was the Respondent’s Adjusted Taxable Income Assessment Method (ATI) not the Gross Income Assessment Method used by Centrelink. As the Applicant’s ATI in the relevant year was $89,329, well below Centrelink’s threshold of $100,900, the Applicant argued that he remained entitled to the Offset.

32. The Gross Income Assessment Method is used by Centrelink to determine non-medical eligibility for a pension payment under the Social Security Act1991 and the Veteran’s Entitlement Act 1986. The method was designed to provide a clear, consistent and accountable way to determine a person's financial capacity and the eligibility for income support. “Importantly it aligns with the system's design which is to ensure the most vulnerable people receive the most support”. Assessing gross income was determined by Treasury, not the Respondent, as “a robust and fair way to measure a person’s capacity to earn money and manage their financial affairs thereby determining the level of support they require”.[18]

    [18] Australian Government Guides to Social Policy Law Social Security Guide Version 1.332- released 22 September 2022.

33. The Gross Income Assessment Method is the correct test. In the relevant income tax year, the Applicant’s gross income exceeded the threshold of $100,900.

34. The Applicant relied heavily on wording in the EM and the Report to Treasury [19] in support of his submission that the Respondent had adopted an overly narrow interpretation of the legislative framework, thereby unjustly excluding certain taxpayers from the Offset.

    [19] Australia’s Future Tax System, Report to the Treasurer, December 2009,p 86 par [7], [8].

35. The Applicant submitted the following arguments at the hearing:

    “I look at the plain reading of subsection 61-10(2) and interpret the word ‘if’ in this text as allowing more flexibility as a condition that could meet eligibility, but not the only condition, as would be indicated by use of the words “only if”. (Emphasis added)”.

    “The use of ‘if’, as opposed to ‘only if’ suggests greater flexibility if its application and the use of the word ‘may’ along with ‘considered to be’ in the Explanatory Memorandum, appears to allow greater flexibility for the decision maker to use their discretionary power in evaluating the entire circumstances to  decide whether there is an alternative method of proving  the taxpayer’s dependent satisfies the object of the act, and if the taxpayer is eligible for the DICTO tax offset” [20].

    [20] Written summary of the Applicants argument presented at the hearing.

    Respondents contention

36. The Respondent relied on the dictionary definition of “paid -being the past term of pay, means to give (someone) money that is due”. The Respondent’s position is that the word ‘paid’ requires more than mere eligibility for a Disability Support Pension. Having medical evidence demonstrating a genuine inability to work, but not being entitled to receive one of the specified pensions because of an ineligibility event, was insufficient to satisfy the criteria in subsection 61-10 (2) of the ITAA 1997.[21]

    [21] Respondents Response to the Applicants Further Submission TB Tab 7 282

37. The Respondent contended that being paid one of the three eligible pensions specified in section 61-10(2) is a strict requirement of that provision. Consequently, the Respondent had no discretion to depart form the legislated eligibility criteria when determining entitlement to the DICTO.[22]

    [22] Ibid p 283

38. The Respondent referred to EM at paragraph [7.36[23]]., which provides as follows:

    “A dependent is considered genuinely unable to work due to invalidity where that person received: a disability support pension or a special needs disability support pension under the Social Security Act 1991; or an invalidity services pension under the Veterans Entitlements Act 1986”. ( Emphasis added).

    [23] the Taxation and Superannuation Laws Amendment (2013 Measures No 2) Bill 2013 Explanatory Memorandum

39. The Respondent’s position is that the “the Explanatory Memorandum, read in its entirety, supports the Respondent’s interpretation that receipt of one of the listed pensions is a requirement in order to be entitled to a DICTO. That is, receipt of one of the listed pensions determines whether a dependent meets the requirement of being genuinely unable to work due to an invalidity. The plain and orthodox construction of the words used in subsection 61-10(2) of the ITAA 1997 is entirely consistent with the Explanatory Memorandum. The Applicant’s construction is not. The respondent does not have the discretion to abandon legislation and consider extrinsic materials that is submitted by the Applicant”[24].

    [24] Respondents Response to the Applicants Further Submissions – TB Tab 7 - 283

    Reasoning

40. The Tribunal accepts that the Respondent’s position is correct. Both the Respondent and the Tribunal are constrained by the wording of the Act.  

41. The High Court has stated on numerous occasions: “To adopt a meaning which is not reasonably open on the natural and ordinary meaning of the words used in the context in which they appear is not interpretation, which is a judicial function, but amendment, which is a legislative function”: (Marshall v Watson[25], at 649; Moncialovic v the Queen[26] )

    [25] (1972) 123 CLR 640/

    [26] (2011) 245 CLR 1,[1] per French CJ at [39].

42. In H Lundbeck A/S v Sandoz Pty Ltd[27] the High Court (Keifel CJ, Gageler, Steward and Gleeson JJ) stated: “The province of statutory construction is the attribution of meaning to the enacted statutory text, not the remediation of perceived legislative oversight. It is impermissible to attach to a statutory provision a meaning which the words of the provision cannot reasonably bear” (Momcilovic v the Queen[28]).

    [27] H Lundbeck A/S v Sandoz Pty Ltd[27] (2022) 276 CLR 170, [63] (Keifel CJ, Gageler, Steward and Gleeson JJ).

    [28] Ibid.

43. It is well settled that a word may only be substituted for another word where, without the substitution, the provision is unintelligible, absurd, totally unreasonable, unworkable, or totally irreconcilable to the plain intentions as shown by the rest of the statute; Federal Steam Navigation Co Ltd v Department of Trade and Industry[29]; and Cooper Brookes Wollongong Pty Ltdv Federal Commissioner of Taxation[30] .

    [29] [1974] 1 WLR 505 508-509 per Lord Reid.

    [30] (1981) 147 CLR 297,at 304- 306.

44. In Esso Australia Pty Ltd v Australian Workers Union[31], the High Court reiterated that “the court’s ability to construe the statutory provision in a manner that departs from the natural and ordinary meaning of the terms of the provision in the context in which they appear is limited to construing the provision according to the meaning which, despite its terms, it is plain that Parliament intended to have.”( Emphasis added)

    [31] (1995) 185 CLR 653.

1. The High Court has continually cited with approval Lord Diplock’s conditions[32] for implying words into a statute. The rule was eloquently restated by the High Court in Western Australia v Commonwealth[33]  “It is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is the wrong thing to do”.( Emphasis added).

   [32] Jones v Wrotham Park Settled Estates [1980] AC 74,105-106.

   [33] 1975) 134 CLR 201, at 251.

2. In Mondelez Australia Pty Ltd v Automative, Foods, Metals, Engineering, Printing and Kindred Industries Union[34], Edelman J stated at [95] “the duty of courts in the exercise of statutory interpretation is to give effect to the meaning of statutory words as intended by Parliament. In common with how all speech acts are understood, the meaning is that which a reasonable person would understand to have been intended by the words used in their context. One presumption, or inference based on common experience of legislative acts, is that when Parliament uses words with a common or ordinary meaning then the words are intended to bear that ordinary meaning”.

   [34] [2020] HCA 29

3. The word “if” in section 61-10 (2) is used as a conjunction to connect subclauses (a) and (b).  A reasonable person would understand that the word “if” in the context of s 61-10(2) imposes a condition that the individual is receiving money from the Commonwealth Government under one of two pieces of Commonwealth Government legislation; the Social Security Act 1991 or the Veteran’s Entitlement Act 1986 and not under any other Act. In this sense, the word “if’ imposes a condition precedent that must be fulfilled.

4. For the benefit of the Applicant, the Tribunal draws a comparison with section 24 of the National Disability Insurance Scheme Act 2024 (Cth) (NDIS Act) that sets out” disability requirements”. Section 24(1) lists the criteria necessary to establish a ‘disability’ for the purposes of the NDIS Act. The section is in the following terms:

   “Disability requirements

   (1)  A person meets the disability requirementsif:

   (a)  the person has a disability that is attributable to one or more intellectual, cognitive, neurological, sensory or physical impairments or the person has one or more impairments to which a psychosocial disability is attributable; and

   (b)  the impairment or impairments are, or are likely to be, permanent; and

   (c)  the impairment or impairments result in substantially reduced functional capacity to undertake one or more of the following activities:

   (i)  communication.

   (ii)  social interaction;

   (iii)  learning;

   (iv)  mobility;

   (v)  self - care;

   (vi)  self - management; and

   (d)  the impairment or impairments affect the person's capacity for social or economic participation; and

   (e)  the person is likely to require NDIS supports under the National Disability Insurance Scheme for the person's lifetime.

5. Section 61-10 (2) of the ITAA 1997 is not a test to establish whether a person is “genuinely unable to work due to an inability” [35]. Rather, the test set out in s.61-10(2) prescribes the conditions for entitlement to claim an income tax offset. The Tax Offset is available to a taxpayer who is contributing to the maintenance of another individual, not the person with the disability. The requirement imposed under s61-10(2) (a) or (b) is that the other individual is in receipt of disability support pension or a special needs pension under the Social Security Act 1991 or an invalidity services pension under the Veterans’ Entitlement Act 1986.

   [35] Applicant’s statement of Facts Issues, and Contentions TB- Tab 4 – 126 at (g).

6. The Respondent had no discretion to abandon the legislation and consider extrinsic materials submitted by the Applicant. To be eligible for a tax offset under Division 61, the criteria set out in s 61-10(2) must be satisfied.

   CALCULATION OF THE OFFSET FOR A PART OF A YEAR OF INCOME

7. There was no evidence before the Tribunal that established the Applicant was in receipt of a DSP for an 85-day period in the income tax year ended 30 June 2022.  Neither party raised subsections 61-30 to 61-40, so it was unnecessary for the Tribunal to consider reductions under subsection 61-45. However, for the sake of completeness and for the benefit of the Applicant, the Tribunal makes the following observations regarding applicable tax offsets.

8. Under s 61-30 of the ITAA 1997, the maximum offset to which a taxpayer was entitled for the income year ended 30 June 2022 was $2,833.

9. Had the Applicant’s spouse received a payment of a DSP from Centrelink for 89 days in the income year ended 30 June 2022, the maximum offset claimable would then have been reduced under subsections 61-30 and 61-40. A reduced Offset is calculated on the basis that the maximum offset available, $2,833, is divided by the number of days in a year, 365, and multiplied by the number of days the Applicant’s spouse received the DSP, 89. Hypothetically, that would result in a figure of $686.64 as the maximum offset.

10. Section 61-45 of the ITAA 1997 requires that, in calculating the offset, the amount of the maximum tax offset ($686.64) must be reduced by $1 for every $4 by which the Applicant’s spouse’s adjusted taxable income for offsets exceeds $282.

11. On the assumption that Mrs Urquhart had some adjusted taxable income for offsets in the relevant year, the statutory amount of $282 under s 61-45 is then deducted from the offset amount, and the result divided by 4. That means the (reduced) maximum Offset of $686.42 must be further reduced by the figure arrived under s 61-45.

12. As a consequence of the application of the statutory formula, presumably even if the Applicant had established that Mrs Urquhart was in receipt of a DSP for 89 days in the income year ended 30 June 2022, because of the mathematical formula set out in s 61-45 it is more probable than not that the amount of any offset to which the Applicant was entitled would have been reduced to nil.

    CONCLUSION

13. Unfortunately for the Applicant, the matter is governed by legislation that the Tribunal must apply.  On that basis, the Tribunal finds no error in the Respondent’s application of s 61-10(2).

14. The Applicant has not established that his Notice of Amended Assessment for the year ended 30 June 2022 is excessive. Accordingly, the decision under review is affirmed.

Date(s) of hearing:	2 April 2025
Date final submissions received:	16 April 2025
For the Applicant:	Mrs Harli Urquhart
Solicitors for the Respondent:	Australian Taxation Office Litigation and legal support services