In the United States, Americans can split or average out their income with their partner to reduce the tax they pay. Could this be adopted in Australia?
He estimates if he was able to split his income with his wife, he would generate a tax saving of between $10,000 and $15,000 a year."With cost of living going up, the cost of staples, grocery shops haven't got any cheaper. It's only going up. Insurance is going up."Their youngest child has Down syndrome and Andrew's wife stays at home to homeschool him.
Elizabeth Morton, a lecturer in taxation at RMIT, said it was a fundamental right to be taxed as an individual."Some approaches considered in Australia which include an opt-in approach, retain that right to be taxed as an individual, but individuals can then opt in to be taxed as a family unit," Dr Morton said.
He said the business did not earn enough money for the income distribution to make a big difference on the amount of tax paid, but there were other reasons why the trust was created. "If it is a business then treat it as such and allow income averaging and splitting instead of creating hoops for us to jump through such as the creation of trusts."The ATO says you could have "cash left at the door".He said a discretionary trust, sometimes referred to as a family trust, allowed for income from a business to be distributed between family members."Imagine if you can get six or seven or eight tax-free thresholds … the tax savings can be quite significant.
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