Is money pay to teenage children for IP maintenance deductible?

[MKP]

My children are growing up and its about time for them to learn some skills around the house. This year (during this holiday period) they are helping me with painting, deck oiling and other maintenance job at one of my IP. They have not demanded to be paid, but I think its fair to reward their efforts and willingness to work. If I pay them cash/hourly rate, and get a hand written receipt from the news agent as a proof of payment, will I be able to claim it as part of my tax deduction for the FY?

 

[kathryn d]

I did similar, (in Canada) when I provided child care in my home.

I paid my children, to help me....they gave me a receipt.
I also declared their income, when I filed a separate income tax for each of them.

 

[MKP]

Thanks Kathryn,
That was what I thought as well. Would make sure to check with ATO rulings before proceeding with the idea.
MKP

I did similar, (in Canada) when I provided child care in my home.

I paid my children, to help me....they gave me a receipt.
I also declared their income, when I filed a separate income tax for each of them.

 

[Terry_w]

They could possibly be paid if they are performing real work, but many issues. Do they have an ABN? Contract? What about insurance? What if they earn more than $416 per year?

 

[MKP]

They will only get paid if they do real work (not Mum and Dad doing it for them).
They don't have an ABN or contract, no insurance either.
I never knew about $416 per year limit; any link to the ruling or ruling number, please, Terry?
One of my children is over 18 and lodge tax return every year; the second is under 18; would different rulings apply to each?
Thanks

They could possibly be paid if they are performing real work, but many issues. Do they have an ABN? Contract? What about insurance? What if they earn more than $416 per year?

 

[Ed Barton]

They could possibly be paid if they are performing real work, but many issues. Do they have an ABN? Contract? What about insurance? What if they earn more than $416 per year?

It's not likely to be unearned income for the kids and therefore the $416 limit wouldn't apply? Maybe?

 

[Ed Barton]

They will only get paid if they do real work (not Mum and Dad doing it for them).
They don't have an ABN or contract, no insurance either.
I never knew about $416 per year limit; any link to the ruling or ruling number, please, Terry?
One of my children is over 18 and lodge tax return every year; the second is under 18; would different rulings apply to each?
Thanks

Income of individuals under the age of 18
Income of minors
A minor is a person who is under 18 years of age.
Special rules apply to the income of minors. Under these rules, certain types of income, such as a distribution from a family trust, may be taxed at higher rates.
These rules were introduced to discourage adults from splitting their income and diverting it to their children.
Some minors are excluded from the special rules and are called excepted persons. Ordinary rates of tax apply to all the income of an excepted person.
Even if a minor is not an excepted person, ordinary rates of tax still apply to certain types of income which is called excepted income.
Minors who are Australian residents do not have to lodge a tax return if they earn less than $416 in the 2013?14 income year.
https://www.ato.gov.au/Individuals/...er-18s/Income-of-individuals-under-age-of-18/

So if your minor kid has a job at maccas they will be taxed as an adult. If your minor kids income is from a trust they will probably only get a threshold of $416.

 

[Terry_w]

It's not likely to be unearned income for the kids and therefore the $416 limit wouldn't apply? Maybe?

Yes, good point~!

 

[MKP]

Thanks for the link - I will clarify with ATO as he is also looking to work at maccas next year.

So if your minor kid has a job at maccas they will be taxed as an adult. If your minor kids income is from a trust they will probably only get a threshold of $416.

 

[Paul@PFI]

The answer is that this is personal services income. It's also a part iva scheme. Stop now.

 

[westminster]

Thanks for the link - I will clarify with ATO as he is also looking to work at maccas next year.

Kids can only get $416 pa as 'unearned' income but can join the adults in the normal PAYG 'earned' income world.

The tax free threshold is now very generous so it's unlikely he'll get enough shifts at Maccas to pay tax HOWEVER if he is also employed by you (or your Trust) as a PAYE then it will be a second job and 50% tax will need to paid then claimed back in tax return.

 

[Rob G.]

Whether your payment is for services rendered under an arm's length arrangement or it is merely private family dealings is a question of fact.

This means that each case will be different.

This quote does not sound too convincing ... rather like a parent giving pocket money (a gift of natural love and affection) in return for chores performed.

My children are growing up and its about time for them to learn some skills around the house.

.....

They have not demanded to be paid, but I think its fair to reward their efforts and willingness to work.

Bear in mind sections 26-35 and 26-40 of the ITAA97 as limitations even if the payments might be deductible according to general principles.