Written answers
Thursday, 1 February 2024
Department of Finance
Tax Code
Aindrias Moynihan (Cork North West, Fianna Fail)
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137. To ask the Minister for Finance for a review of tax treatment of increase for qualified adult, that the payment is treated as a separate source of income for the qualified adult in order they can avail of the PAYE employee tax credit and that the extended rate band can be made available to that dependant if jointly assessed; and if he will make a statement on the matter. [4537/24]
Michael McGrath (Cork South Central, Fianna Fail)
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The Social Welfare Consolidation Act 2005 (SWCA) provides for the payment of the weekly state pension. The payment is made by the Department of Social Protection to an individual who fulfills the statutory criteria. The SWCA also provides for an increase in the amount of state pension where the beneficiary of the pension has a qualified adult dependent. The qualified adult portion is described as an “increase” in the pension and is payable in respect of a spouse, civil partner or cohabitant who is being financially maintained and whose income is not greater than a specified amount.
Section 12 of the Finance (No. 2) Act 2013 inserted subsection (2B) into section 126 of the Taxes Consolidation Act 1997 (TCA). The subsection became effective from 1 January 2014, confirming the tax treatment of the qualified adult dependent increase. It provides that, for the purposes of the Income Tax Acts, any increase in the state pension in respect of a qualified adult dependent is treated as if it arises to and is payable to the beneficiary of the pension, that is, the main pension recipient.
Therefore, the beneficiary of a Department of Social Protection pension is assessable on the aggregate of the pension and the amount by which the pension is increased for a qualified adult dependent. This means that the pension payment is not subject to double taxation as the qualified adult increase is deemed to be part of the pension of the person beneficially entitled to the pension rather than a separate source of income for the qualified adult.
Since the increase is treated as the income of the beneficiary for tax purposes, only one employee (PAYE/Employee) tax credit is available in respect of the state pension, including the qualified adult dependent increase, and there is no entitlement to any increase in the amount charged to income tax at the standard rate as a result of the qualified adult dependent payment.
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