The Government has announced in the 2011 Federal Budget that it will seek to stop children under the age of 18 from accessing the low income tax offset (LITO) to reduce tax payable on their investment income, eg distributions from trusts, dividends, interest, income from property etc, effective from 1 July 2011.  This measure is to discourage income splitting between adults and children.  The Assistant Treasurer has said that increases in LITO over recent years have increased the income that can be allocated to children tax free resulting in increased distributions of income to children, in particular from discretionary trusts.

Income earned by children (such as from part-time jobs etc) will still be eligible for the full benefit of LITO. Investment income of minors who are disabled or orphaned or received from inheritances will not be affected by the change.

The Temporary Flood and Reconstruction Levy was passed without amendment by the House of Representatives on 24 February 2011.  The Bills introduce a one year progressive flood reconstruction levy in the form of additional income tax on Australian resident and foreign resident individuals in the 2011-12 financial year.

 The proposed levy payable is 0.5% for taxpayers with taxable income between $50,001 and $100,000 and 1% on taxable income over $100,001. Ms Gillard has said those who receive the Australian Govt Disaster Recovery Payment for a flood event this financial year will be exempt from paying the levy as will individuals with a taxable income of $50,000 or less.

 The Bills now proceed to the Senate.

The Commissioner of Taxation has warned taxpayers to be mindful of a scam email claiming to offer a refund from the ATO.

The email contains a virus which is in an attachment to the email.   The fake email contains a file which asks for personal and credit or debit card details in order for the ATO to pay a tax refund.  The Commissioner of Taxation has said any email requesting personal and credit or debit card details before a refund can be paid is a hoax.

The ATO has issued a reminder to people who had a balance of assessment of $20,000 or more in their 2009 income tax return that they are required to lodge their 2010 income tax return by 31 March 2011.

The Tax Commissioner has advised the ATO will approve “bucket donations” made to the 2011 Queensland Flood Appeal.  For 2010-2011, donations to the value of $10 made to a “bucket appeal” for the floods will be allowable without the need for a receipt.

There have been a number of scams involving emails or phone calls claiming to be from the ATO.  Although the tax office may call you from time to time, you should be wary of unsolicited calls.  The tax office will never email or call you requesting credit card details or to notify you of a money transfer.  Scams include:

• An email scam advising that money is to be transferred into your account – these emails ask for your personal details
• An email scam advising that the tax office has recalculated your refund – these emails also ask for your personal details including credit card and ATM PIN details
• An email scam providing a link to a website in order for you to claim your refund – the website will ask for your credit card details
• A phone scam where someone claiming to be from the ATO will call you and advise you have an unclaimed refund – the caller will ask you to transfer money in order to receive your refund.