We have two children aged 4 and 6 and we want to set up a trust so that we can distribute income to those children as beneficiaries to minimise our income tax as a family group. Can we do this?
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Answer by LegalEagle™ staff, Melbourne 3000 VIC
- There are limits on the amount of tax free income that can be distributed to minors (under the age of 18). Any additional distributions above that limit are taxed at the highest marginal tax rate. The limit is usually around $600 but can vary from state to state. For this reason it is going to be many years before you can make distributions to your children in any meaningful amount.
- However you should look at your family unit as a whole. There might be other advantages. If either you or your partner intend to stop working then a discretionary trust may be effective at sharing income between the income earning and non-income earning spouse.