Low Income Offset changes for minors
In the 2011/2012 budget papers the Federal Government announced changes to the income tax laws applying to minors. From 1 July 2011 minors, that is people under 18, will no longer have access to the low income offset on non-work income. That has implications for those of you currently using a discretionary trust structure that allows distribution of income to your children to reduce income tax liabilities.
In short you will not be able to save any income tax by divesting taxable income away from yourself and/or spouse to your children. Whilst this will mean the tax effectiveness of a trust structure is slightly diminished, it does not mean throwing the baby out with the bathwater. There are many other reasons for utilising a trust structure, not least of which is the legal protection over your personal and business assets.
Whilst the Government constantly preaches the message of simplifying tax laws it is small changes like this that only serve to demonstrate the our tax laws will never be simple and anyone in business will always have need for an experienced, qualified small business accountant.