jwinch

If I were to 'give' my children say £50K each before we come to Australia, and they left it in a UK account until there was a more favourable exchange rate, would there be any tax implication for them in Auastralia, baring in mind they wouldnt be working and the interest was there only 'income'

gordys

Now that's a good question however I believe there's a cap for childrens savings and it's far from £50K. Anyone?

walaj

From my knowledge (so don't take it as definite answer) - In UK children are taxable like adults, so if interest exceed the personnal allowance they would be subject to tax. As far as you are concerned, if you should die (not that I am wishing anything of the sort upon you ) within 7yrs there could be IHT implications. The £50k is in excess of the gift allowances you are allowed to make tax free and giving this sort of money to your children maybe seen as a way of avoiding you paying tax (especially if you are 40% tax payer) in which case IR may treat it as your income.

The Australian implication I don't know

If you have this kind of money it maybe best to seek professional advice of someone with relevant qualificatons and working knowledge of both tax systems as there maybe other options that are beneficial for your specific cicumstances, that could pay for fees you spend

ABCDiamond

It's a LOT less !!

If a minor:
* is a resident of Australia
* is not an excepted person, and
* has no excepted income
then the following rates of tax will apply in 2003-04:

Annual Income = Tax rate
$0 – $416 = Nil
$417 – $1,445 = Nil + 66% of the excess over $416
Over $1,445 = 47% of the total amount of income that is not excepted income.

http://www.ato.gov.au/individuals/co...tent/20046.htm

jwinch

If i am to understand it correctly then the ATO appear to tax income for children at a higher rate than that for adults?

ABCDiamond

That is correct, or rather it is taxed at the highest normal rate. The ATO ensure that you can't do what you proposed

However, if they have "excepted income" such as part time employment income,
this is taxed at ordinary rates.

Note this important rule:
If a minor faces serious financial hardship as a result of the application of the special rules, they may get a tax offset of some or all of the extra tax payable if we consider there is serious hardship due to higher tax rates applying rather than ordinary tax rates.

So it would seem that it is applied fairly.

kirsty&al

Hello,

As well as incurring high tax in Oz you would also fall foul with the Inland Revenue.

(Note: I'm using # for GBP as I dont have the symbol.)

If your children earn more than #100 in interest as a result of a gift from you then it is taxed as if you earned it. Also you are only allowed to provide a tax free gift(s) in one tax year up to the value of #6,000. You can backdate 1 year, if you have unused allowance; so in the first year you can gift #12,000. Note that is total of all the gifts made by you, not per person you are giving it to. However you can make as many gifts as you like if they are all smaller than #250. It is possible to do something called a PET (Potentially Exempt Transfer) where it becomes tax free after 7 years, but you are not allowed to receive it back (this is normally only used by very rich people to avoid IHT).

You've probably guessed by now that using the children to get around tax is not a good idea.

Regards
Alistair

darkless

How does this relate to maintanence payments which will be paid by my stepsons natural father whilst we are in OZ. He has agreed to carry on paying the maintanence and put it into a UK bank account. Do we need to declare this - I dont think we declare it currently!

ABCDiamond

Check this ATO page - Exempt income is not included in your tax return as income

part of it quotes: