TAX INFORMATION

[FAQ]

Disclaimer-The information obtained from the interview in between Michael Hung & Taxation Office on Vietnamese television C31 Australia. Therefore we however, cannot guarantee that every document will appear in the correct tax year, should check the content of all documents returned by this web site in response to your query and seek independent advice before embarking on a transaction.

Baby Bonus, Family Tax Benefit & Children's Superannuation

As we all know, one of the hardest times for families, financially, comes with the birth of a child. Typically, a family's income is reduced after the birth of a child as the primary carer, usually the mother, gives up or reduces her paid employment to care for her child.The baby bonus can help families when they have a baby. Could you please give our viewers an overview of what the baby bonus is.

Certainly. The baby bonus is a refundable tax offset for families who have had a baby after 30 June 2001. The bonus is paid for the first child born after 30 June 2001 even if you have other children. You can get the bonus every year until your child turns five.If you are a person who has gained legal responsibility for a child under five, you would also be entitled to claim the baby bonus.

You must be an Australian resident for tax purposes when the baby is born to be eligible to claim the baby bonus. Being a resident for tax purposes is different to being a resident for immigration and Centrelink purposes.

It is important to remember that the baby bonus is only available through the Tax Office and you would make a claim with the Tax Office at the end of the income year - after 30 June.This bonus is not one of the Centrelink payments that parents may already receive. The baby bonus is paid regardless of other family benefits and is not means tested.So [Name] how much is the baby bonus?

Most families will receive $500 for a full year - but if your taxable income is more than $25,000 and you've had a significant reduction in your income, you may get more baby bonus.

I understand that the amount of baby bonus you receive depends on your taxable income each year.

That's right.If your taxable income is $25,000 or less, you'll get an annual amount of $500 - but you will probably get less in the first year as it is calculated from the child's date of birth.For those people with a taxable income over $25,000, the amount you get depends on how much your income has reduced after the birth of your child.

So what you are saying is that when the parent claiming the bonus returns to work, the baby bonus amount will be reduced to take into account their income.

Yes that's right. Its probably best if I give you an hypothetical example. Let's say for example:

Chi had a baby on 1July 2001. She was working right up until her baby was born. And she earned $30,000 in the 2001 financial year. Chi has to select either the year before her child was born or the year that her child was born as a base year. The amount of income Chi earned in the base year is used in the calculation of the baby bonus. It is best if Chi chooses 2001 as her base year because she stopped working after the baby was born and earned no income. Her income tax on $30,000 was $5,380. Chi's maximum yearly baby bonus would be $1,076 - , which is one fifth of $5,380.

If Chi decides not to work, she would receive a baby bonus of $1,076 ever year until her baby turns five. You can see here that if Chi does decide to go back to work, the amount she receives will reduce as her income increases, in proportion to her income in the base year. In this example, Chi has a taxable income of $15,000, which is equal to half her income in the base year. Chi will receive half the amount of baby bonus that she received in the prior year because she has earned income in that claim year.

What happens if Chi has another baby?

Chi can only claim the baby bonus for the first baby she had after 30 June 2001 - until that child turns five. She cannot claim the baby bonus for another child.

I understand that foster parents are not eligible to claim the baby bonus. Even though they care for a child, they do not have legal responsibility for the child. What is the situation for people who adopt a child?

Only a person who gains legal responsibility for a child under five after 30 June 2001 is entitled to claim the baby bonus.

I have had a specific question on the baby bonus from one of our viewers. In her case, she migrated to Australia with the sponsorship from her husband. She has since given birth to their baby in December 2001. Her husband is on a low income. This viewer was told that she couldn't get the baby bonus as she is receiving Family Tax Payments from Centrelink. Is this true?

No, it's not true.Her child was born after 30 June 2001, and she was a resident for tax purposes at the time she gave birth to her baby. She will still qualify for baby bonus whether or not she's getting other family payments.

HOST Where the baby bonus assisted you with the first child born after 30 June 2001, the Family Tax Benefit is a payment to help you raise your dependent children.Could you please tell our viewers about this payment and how it is different to the Baby Bonus?

The Family Tax Benefit has two parts. Part A helps with the cost of raising children and… Part B provides extra help for one income families including sole parents.To be eligible for Family Tax Benefit, you and your dependent children must satisfy a number of eligibility tests.At a minimum, you must be caring for your children, and you must be an Australian resident. Your children must either be Australian residents or live with you.There are other eligibility tests that must be met including income limits. The Tax Office website explains this in detail.

You have two choices in the way you can claim a Family Tax Benefit. You can claim it as a direct payment through the Family Assistance Office or you can claim the benefit through the tax system. How does this work?

If you lodge a tax return you can claim Family Tax Benefit as a lump sum at the end of the financial year. You can have the amount withheld from your wages each fortnight reduced.As there are a number of factors that must be considered in order to work out eligibility and entitlement to this benefit, viewers would be well advised to contact the Family Assistance Office or visit the Tax Office web site for more detail.

We have had a number of questions by some of our viewers about the number of changes to Superannuation lately, particularly with regard to Superannuation accounts for children. Could you please tell us more.

Certainly. Parents, grandparents, other relatives and friends can now contribute to Superannuation for children who are under the age of 18. Contributions are capped at $3,000 for each three-year period.

Anyone can open a Superannuation account for a child, but I expect that the people who would make the most contributions might be grandparents or other elderly relatives or friends, people who would like to ensure their grandchildren benefit from planning in the long term.

Yes. Anyone can open a Superannuation account for a child. However, they will need the permission of the child's parent or legal guardian to do this.Once a child reaches 16, the child may wish to take responsibility for their superannuation, especially if they are in the workforce and receiving superannuation support from their employer.

By introducing the concept of saving for the future, children will benefit in the long term if, from a young age, they understand how the value of their superannuation can grow over the years till their retirement.

Yes, that's right. I also want to mention to viewers that that coupled with the baby bonus, superannuation legislation has now also been changed allowing parents who receive the baby bonus to use it to make personal contributions to a super fund for their child.And the good news is these contributions are not restricted to the baby bonus amounts.

Before we go, some of our viewers have also asked about and are interested in opening a trust account for their children. In particular, they want to know what are the tax implications of these accounts?

Where the money in the account is the child's, any interest income would be assessable to the child. Depending on the amount of interest reached, the child may be required to lodge an income tax return.However, where the money in the account is used to pay for the normal expenses incurred in raising your child, then it is unlikely that the money is the child's and as such any interest income earned would rest with you, the parents.