We set my daughters (oldest is now 14) up with term deposits with money from their grandmother and other gifts.
Why do they have to pay a 68% tax rate on the interest over $416?
Posted Sep 1, 2017, 12:12 PM UTC · edited
If you stick it in something that is mostly capital growth you can minamise the impact of these tax avoidance measures. Insurance bonds is another option, but I'm concerned the fees are too high.
No TFN?
Children get taxed at 68% for earnings between $416 to $1307, and 47% for amounts over that. (Provided they are not working full time).
It's set ludicrously high to stop parents using their kids as a tax haven. Unfortunately it stings a lot of people like OP who are doing something good for their daughter, and not trying to abuse the system.
How do you know your children are liable for tax? Like did you inquire or get sent a letter?
So that parents don't use their children to avoid tax...
But it only ever was their money. Not the parents'.
In your case yes, but the ATO doesn't know that. Unfortunately you/your daughter are one of the 'good ones' having to suffer from a deterrent that isn't aimed at you.
The vast majority of children will never be earning >$416 in interest, and so the deterrent is put in place to stop parents from using their kids for tax avoidance.