High taxes will hit daugh­ter’s windfall

Michelle is con­cerned that ...

Money Magazine Australia - - ASK PAUL -

QMy­daugh­ter is soon to in­herit a size­able sum (about $180,000), and as the ex­ecu­tor of the will, I need to hold the money in trust un­til she turns 18. If I place the money in a term de­posit ac­count, will she li­able to pay high taxes? I am keen to en­sure that I un­der­stand any tax im­pli­ca­tions for.

What a won­der­ful start in life for your daugh­ter. As ex­ecu­tor you will have to act as per in­struc­tions in the will, but I am hope­ful you can hold in­vest­ments for her as her trustee. The prob­lem for un­der-18-year-olds is that they pay tax on un­earned in­come at re­ally high rates. The first $416 would be tax free but the amount be­tween $417 and $1307 is taxed at 66% and then at 47% on in­come above $1307. Not nice!

If you in­vest as her trustee, you would pay tax as if it was your in­come. It is worth talk­ing to your so­lic­i­tor about the con­di­tions in the will

A term de­posit is a very safe but low-re­turn choice. Other op­tions such as shares or a mix of shares and term de­posits are all quite rea­son­able, but de­pen­dent on her age now. I do rec­om­mend that shares be held for a min­i­mum of five years.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.