Think Before You Apportion Your Income to Your Child

The ATO and other government agencies determine a “minor” to be those under the age of 18, however some people are surprised to find out that the tax rates that can be applied to the “unearned” income of such young taxpayers can seem punitive.

Did you know, for minors, the tax free threshold is a mere $416. Between $417 and $1,307 the rate is set at 68% (66% after June 30, 2017, when the Temporary Budget Repair levy expires). After $1,308, the top (adult) marginal rate applies.

But the reason for the seemingly harsh rates has little to do with punishing the kids and more to do with the behaviour of the older generation. These rates were introduced to stop or discourage adults from channelling a portion of their income through their child’s bank account, thus taking advantage of lower marginal and effective tax rates for themselves.