What are we teaching our children when we use them as taxpayers of convenience?

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Children are mainly used as taxpayers of convenience by controllers of discretionary trusts (often called “family trusts”), although there are other means as well.

Metadata

Provider:

The Conversation

URL:

https://theconversation.com/what-are-we-teaching-our-children-when-we-use-them-as-taxpayers-of-convenience-206987

Retrieved on:

Monday, July 3, 2023

Information

Tags:

Parent, Commissioner, Review, Ethics, Employment, Trust, Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, Time, Child, Income, Toy, Life insurance, Health insurance, Tax

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INDIA

Summary

Key Points:

Children are mainly used as taxpayers of convenience by controllers of discretionary trusts (often called “family trusts”), although there are other means as well.
The Low Income Tax Offset boosts this threshold further for low income earners ensuring some can earn up to $21,884 tax-free.

Some taxpayers accumulate tax-free thresholds

Probably the most high-profile example of using the tax-free thresholds of others was a case over three decades ago in 1989 known as East Finchley Pty Ltd versus the Commissioner of Taxation.
It made use of the tax-free thresholds of foreigners who at the time were allowed to receive $585 tax-free.

Children are a source of tax-free thresholds

Yet Australia’s law reports are replete with examples of $416 per year being allocated to children under 18, some from when they are a few months old.
And there are exceptions that allow for children under 18 to receive up to $21,884 per year tax-free, including from a trust created by a grandparent’s will.
The parents treat it as their own, with the “payment” to children being viewed as “just for tax purposes”.

Some of the arrangements artificial and contrived

There is an exception for an “ordinary family dealing”, but it does not extend to dealings that are “artificial, contrived, or overly complex”.
And a case can even be made that treating children as taxpayers of convenience breaches their rights and child welfare laws.
It certainly isn’t good for them if it encourages them to adopt the ethics of their parents.