The measure introduced as part of Tax Laws Amendment (2011 Measures No.4) Act 2011 removes the ability of minors (children under 18 years of age) to use the Low income tax offset to offset tax due on their unearned income, such as dividends, interest, rent, royalties and other income from property. This will reduce the benefits of income splitting between adults and children.
From 1 July 2011, minors will not be eligible for the Low income tax offset on unearned income.
Rules
| Resident Minors | The rules apply to income derived by the minor directly or through a trust. Where the minor is an Australian resident the special rules do not apply if the eligible taxable income is $416 or less. Eligible taxable income between $416 and $1,307 is taxed at 68% on the part of the relevant taxable income exceeding $416, thereby phasing in the special tax rates. Eligible taxable income of $1,308 and more is taxed at a flat 47%. |
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| Non-resident Minors | A foreign resident minor is taxed at 32.5% on the first $416 of unearned income, at 66% on eligible taxable income between $416 and $663 and at 45% on relevant income of $663 and more. As both apply to non-resident minors, the same rates will be applied to the unearned income. |
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| All Minors | Minors will still be able to use the Low income tax offset to reduce tax payable on their work income. |
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Schedule U is accessed from item A1 in the Individual return. Amounts entered in Part B are totalled and integrated to label J at item A1. This income is not subjected to the higher Div6AA rates and tax is calculated at standard rates.
Part A - Excepted persons
Do you claim to be an excepted person on the grounds that at 30th June 2018 you:
- Worked full-time or full-time for 3 months or more in 2017-18 (ignoring full-time work that was followed by full-time study)? AND
- Intend to work full-time for most or all of 2018-19 and not study full-time in 2018-19?
- Were entitled to a disability support pension or someone was entitled to a carer allowance to care for you?
- Were permanently blind?
- Were disabled and were likely to suffer from that disability permanently or for an extended period?
- Were entitled to double orphan pension, and you received little or no financial support from your relatives?
- Were unable to work full-time because of permanent mental or physical disability and you received little or no financial support from your relatives?
- Were the main beneficiary of a special disability trust?
If you were in any of the above categories on 30 June 2018, all of your income will be taxed at standard rates.
Part B - All or part of your income is excepted
Do you claim that any part of your income is excepted income on the grounds that it was:
- Employment income paid by an employer
- Taxable pensions or payments from Centrelink or the Department of Veterans' Affairs
- A compensation, superannuation and pension fund benefit
- Income from a deceased person’s estate
- Income from property transferred to you because of another's death or family breakdown, or to satisfy a claim for damages for an injury you suffered
- Income from your own business
- Income from a partnership in which you were an active partner
- Net capital gains from the disposal of any of the property or investments referred to above
- Income from investment of amounts referred to above
Integration
Total Excepted Income is the total of the income entered at Part B. Subtract the amount of deductions from excepted income to give the Net excepted income.
Net Excepted Income integrates to item A1 label J.
