Children's incomes

[Traveller]

I'm hoping that someone can help me with this enquiry.

Would my family tax benefit and CCR be affected if my children had an income of their own? Our household income would stay the same, but my husband and I would have much smaller personal declarable incomes with the rest being split between our children who would be shareholders of our family business.

We have been asked to consider doing this by the company my husband subcontracts to for tax reasons. I'm just a bit nervous about making the change from a partnership to a PTY Ltd if it means we have to pay more for childcare and get less FTB as we would really struggle if these payments were changed.

Thanks in advance

Trav
xx

[Mum2Romone]

Im pretty sure thats illegal....

Your children can have incomes ( if they earn money for whatever reason... modelling for eg.) but you cannot designate a wage per se in a family business .. they would be required to pay tax etc on any income also and declare it

[Traveller]

It would be a completely legal set up M2R, and we would still be paying tax on all the income our children earned (as the company would pay tax before releasing it to shareholders). It's a fairly common set-up within self employed families, just all the families I have spoken to don't have daycare costs to consider and I don't want to jeopardise them. ETA It is called a proprietary limited family business, with my husband and I as staff and our children as shareholders.

[Frantelle]

I think that what your thinking of is either a family trust or a discretionary trust where income can be allocated to minors for tax purposes, and it that is the case it is not illegal but I do recommend that you see a solicitor and accountant that specialises in this area as they can be a little tricky.

[briggsy's girl]

generally, child income for an under 16 year old is not assessed for ftb purposes if they continue to be full time students

FTB is based on the information received from the tax office as to what your taxable incomes are, so it wouldn't show up there. however, if a tip off were set up for income being "hidden", i'm not sure of what would happen as technically you're still earning the money, it's just being given in the name of your children to gain a larger amount of money from the government (FTB) and reduce the tax paid (as the income is being spread over 6 people instead of 2, meaning 6 tax free thresholds and low income offsets instead of 2).

i would make sure you check with ato directly if you can, or an accountant/solicitor/financial advisor to make sure it's going to be a genuine benefit and, if you do it, make sure it's all tied up properly. i have heard of people "hiding" income in the name of their children and being done for fraud (not directly, so i'm not sure of specifics) so you want to make sure everything is legit. there are cases where money paid to children still impacts parents as it had been deemed a way of avoiding tax or gaining a benefit underhandedly kwim?

[Traveller]

Thanks BG I'm going to chat with our accountant when I do the taxes so I'll make sure it's all legit from their point of view, and they are usually pretty good with that sort of thing. I just wanted to make sure that any income my kids had didn't have to go towards daycare expenses, etc.

[briggsy's girl]

no it doesn't

will impact them (and you) in future if you need to apply for income support (just had a quick look at the website - if something goes belly up and you need help, you can ALL be deemed to be earning income from the trust even if it's not paying you dividends, which may work against you - hopefully it never comes to that, but something to check up on as well)

[Traveller]

no it doesn't

will impact them (and you) in future if you need to apply for income support (just had a quick look at the website - if something goes belly up and you need help, you can ALL be deemed to be earning income from the trust even if it's not paying you dividends, which may work against you - hopefully it never comes to that, but something to check up on as well)

Thanks, that's something I will ask the accountant about.