It is the part of the arm that is level with the arm-pit, which roughly equates to the t-shirt line. Because his arm is out pointing where he wants to cross the part of his arm that can score is ahead of the defender and is therefore offside.
That is how it works now, there is no element of giving the attacker the benefit, if he is just 0.01mm further ahead he is offside. I have no sympathy with those moaning, as everyone in football has been moaning for decades when assistants get offsides wrong by millimetres, but now the technology is there to fix it they don't want it any more. They can't have it both ways.