The Gillard Government will enhance the fairness of the taxation system and discourage the tax avoidance that currently occurs when high income earners allocate their income to children under 18 years of age.
Over the last 10 years, the Government has increased the value of the low income tax offset to provide tax relief to low income workers. Increases in the low income tax offset have, however, increased the amount of income that can be allocated to children tax free. These increases have been accompanied by increased distributions of income to children, especially from discretionary trusts.
From 1 July 2011, minors will no longer be able to use the low income tax offset to reduce income tax due on their non‑work income, such as that from dividends, interest, rent or royalties.
Minors will continue to be able to use the low income tax offset to reduce income tax due on their work income. This means that children under 18 will face the same tax rates on their income from work as those over 18 years.
The measure will increase revenue by $740 million over the forward estimates.