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Distributing Funds to Children

Discussion in 'Accounting & Tax' started by MTR, 12th Apr, 2016.

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  1. MTR

    MTR Well-Known Member Premium Member

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    This was overlooked by my accountant.... I have yet to speak to him.

    I believe he should have distributed funds to my children to reduce tax, both at University, not on Centrelink or Hecs

    I just want to understand what amount can I distribute as I am trying to reduce tax??


    Thanks

    MTR:)
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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  3. wylie

    wylie Moderator Staff Member

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    Isn't that for children under 18? I'm thinking these children at uni would be old enough to get more and it would be treated as adult earnings according to their income from elsewhere.
     
  4. wylie

    wylie Moderator Staff Member

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    Do you have a family trust and therefore able to distribute to them? If so, then you need to let the accountant know their other income so it can be calculated how much each child can get and how it affects their individual tax position.
     
  5. MTR

    MTR Well-Known Member Premium Member

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    Thanks
    Yes, family trust?? of course. I cant believe this was overlooked
     
  6. Skilled_Migrant

    Skilled_Migrant Well-Known Member

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  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    First make sure they are beneficiaries.

    The tax free thresholds for residents are:

    $416 pa it is if they are minors.

    But if they are over 18 it is $18,200 or about $20k. with the Low Income Tax Offset.
     
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  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Make sure the trustee actually gives them the money, otherwise it will be a unpaid present entitlement.
     
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  9. mrdobalina

    mrdobalina Well-Known Member

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    That's a big oversight! Check back over previous years and see if the same mistake was made by the accountant.
    If they are adults, then they get the full benefits as beneficiaries of the family trust.
     
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  10. D.T.

    D.T. Adelaide Property Manager Business Member

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    Up to $18k tax free in some circumstances, must be a novice accountant.
     
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  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    what year are you talking about MTR? If last year then it is too late
     
  12. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The trustee makes distributions, not the accountant. Read the trust deed. Many people have sought action against a tax adviser for this to learn that the accountant isnt responsible. The position generally taken is that the adviser may be asked to give advice on what distributions may be made but the final determination is made solely by the trustee. If the trustee doesnt ask its hard to argue negligence. Tax law requires trustees resolve to distribute in accordance with the trust deed and also make a determination prior to 30 June.

    You cant amend a trust distribution if you were contemplating this....Amending a trust distribution is a red flag and can trigger a bigger tax problem.

    There can be many reasons why a child beneficiary is not allocated any income. Or adult child beneficiaries. I often suggest clients with adult children at uni consider distributions to them then pay them their allowance, books, fees etc through the trust to discharge that unpaid present entitlement so that it cannot be demanded later. Perhaps even wedding costs etc.

    Tip : The tax adviser should prepare all family returns at same time as trust.
     
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  13. MTR

    MTR Well-Known Member Premium Member

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    last financial year, not been lodged yet.
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Did the trustee resolve to distribute already?
     
  15. MTR

    MTR Well-Known Member Premium Member

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    no not yet, will chat to him today.
     
  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Then you are in a bit of trouble. Unless there are default beneficiaries of the trust the trustee will be taxed on the whole income at 47%.
     
  17. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  18. MTR

    MTR Well-Known Member Premium Member

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    mmm, will find out more today
     
  19. sanj

    sanj Well-Known Member

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    you've mentioned some accounting issues in the past, was it with this accountant or the precious one?

    if you're sure this accountant is good and you want to continue with them then I'd suggest sitting down with them; working out what has gone wrong and why and how the 2 of you can reduce the chance of it happening again.

    something basic like not at least discussing distributing income to lower taxed beneficiaries and not doing your declarations on time shouldn't be happening so would be worth working out if they have dropped the ball, you have or if it's just a case of better communication being necessary would be a worthwhile exercise imo.

    personally I think you also should have picked up on something basic like that, eg he might not know about your kids or specifically the relationship between you and them which would facilitate something like this. was the same thing done the previous year? did no distributions get made to them then either?
     
    Last edited: 12th Apr, 2016
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  20. MTR

    MTR Well-Known Member Premium Member

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    no not novice just spoke to him we can sort out fortunately:)