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Children's tax exempt income

What's changed?

From 1 April 2012 the tax credit for children was withdrawn and replaced with a limited income exemption for children. The main change was that employers and schedular payment payers are now required to deduct tax from the payments they make to children regardless of their level of income. As this happened during the year there was a transitional process where some payers could continue to not make deductions until 31 March 2013.

Important

Under the new limited income exemption, a school child does not need to pay tax on income of less than $2,340 which would not ordinarily be taxed before they were paid.

When you might need to file a tax return for 2013 and later years

You may need to pay tax on any income you have received that hasn't already had tax taken out of it.

Read this information if you:

  • were 14 or under, or
  • were 15, 16 or 17 and still attending school , or
  • turned 18 on or after 1 January in the previous tax year and continued to attend school including a school for people with disabilities, but excluding tertiary institutions.

You may have had income with tax already taken out

This could be:

If all your income for the tax year had tax taken out before it was paid to you, you will not qualify for the income exemption. However, you may want to check if you need to file a tax return or receive a personal tax summary for any other reason.

You may have had income that hasn't had tax taken out

Note

A payment of pocket money (an allowance) from your parent, caregiver or immediate relative is unlikely to need to be taxed if it is a basic living allowance or gift.

It is likely that tax hasn't been taken out of any payment you received if you:

  • worked as a self-employed person, or
  • worked around the home of a neighbour or family friend, and that work was not part of a business that they carry on, or
  • received salary/wages or schedular payments of less than $45 per week (or $2,340 for the year) during a tax year ended 31 March 2013 or later, and the payer continued to not deduct tax under the transitional process.

If you haven't had tax taken out of your income

Read about the 3 situations where you may not have had tax taken out of your income

1a. If your income from work performed for a neighbour, family friend or as a self-employed person was less than $2,340

The exemption applies. This income is tax-exempt and is not included in an income tax return or personal tax summary.

You may be required to file a tax return or receive a personal tax summary for another reason. Check if you need to file a return. You do not need to include exempt income.

1b. If the income in "1a" above was $2,340 or more

The exemption doesn't apply. You are required to file an income tax return and include all your income.

You'll need to include both your untaxed income and any income you received with tax taken out during the year. Don't include any payment you received from a parent, caregiver or immediate relative as a living allowance or gift.

You may claim a tax credit for any tax paid on your behalf by an interest or dividend payer, your employer or a person that paid you schedular payments

2. For 2013 if your income from salary, wages or schedular payments totalled less than $2,340, and "1a" and "1b" do not apply

The exemption doesn't apply to this income.

During the 2013 tax year the person you worked for:

  • may not have deducted tax to allow for the tax credit for children, or
  • may have deducted a reduced amount of tax so you would benefit from the tax credit for children as your income was more than $2,340.

You do not have to file a return because of this income alone. However, if you do file a tax return or receive a personal tax summary for another reason you will need to include this income. It is likely that you will have tax to pay as tax will be assessed on these amounts.

For 2014 and future tax years your employer will deduct tax from your earnings so you may not need to file a return or receive a personal tax summary. If you are paid $200 or more of schedular payments then you must file a tax return.