Tax changes to affect minors

Several measures in the federal budget will affect taxpayers’ ability to channel income to their children.

From 1 July 2011, the Low income Tax Offset will no longer be available to reduce the tax on unearned income of children under the age of 18. Unearned income includes dividends, interest, rent, royalties and other income from property. Minors who are orphans, who have a disability, or who receive unearned income from compensation payments or inheritances will not be affected.

The Low Income Tax Offset will still apply to employment income earned by the minor.

In another measure, the government will enable the streaming of capital gains and franked distributions and will target the use of low tax entities, especially exempt entities and minors, to reduce the tax payable on the taxable income of a trust. The measure will reduce opportunities for taxpayers to minimise their tax liabilities.

Speak to your Bongiorno adviser before 30 June to develop a strategy for your trust distributions for this year and to discuss the implications for future years.

Sources:
Institute of Public Accountants – 2011 Budget Report