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The 2011-12 Federal Budget
includes changes to limit the availability of the low income tax offset for
minors to employment income only.
Up until 30 June 2011, minors have
been able to apply the low income tax offset to “unearned income” such as
distributions from family trusts, interest and dividends.
This has meant that
minors have been able to receive small amounts of unearned income tax free each
year. For example, a minor could receive
$3,333 of unearned income tax free in the 2011 tax year.
The new rules come
into effect from 1 July 2011
and will mean that unearned income will be taxed at the tax rates in the below
table.
|
Unearned income |
Tax rates |
|
$0
- $416 |
Nil |
|
$417
- $1,307 |
Nil
+ 66% of the excess over $416 |
|
Over
$1,307 |
45%
of the total amount of income | | |
What
does this mean?
First, the practice
of distributing small amounts to minors from family trusts will need to be
re-assessed for the 2012 year onwards.
Secondly, families
will need to review children’s bank accounts and investments in shares, etc. in
order to ensure that the income generated will not give rise to unfavourable
tax consequences.
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T: + 61 3 8618 2222 |
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