Minors no longer entitled to low income tax offset on investment income

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.