The maximum child rebate payable has increased from $156 to $351 a year for the 2006-07 and subsequent tax years.

Section KC 2 of the Income Tax Act 2004

The maximum child rebate payable has increased from $156 to $351 a year.

Background

The child rebate was introduced so children are not required to pay tax on small amounts of income. As the child rebate has not been increased since 1983, its real value has eroded over time.

Consequently, an increasing number of children are earning income which exceeds the current rebate threshold. This is problematic as some child taxpayers incur compliance costs in relation to small amounts of income earned, while others fail to meet their tax obligations. When children do comply, administrative costs associated with collecting and processing small amounts of tax can exceed the revenue collected.

Key features

Section KC 2 of the Income Tax Act 2004 increases the child rebate to $351 a year and allows an eligible child to earn income (less interest and dividends) up to $2,340 per annum, tax-free.

Some eligible children will no longer be required to deduct tax or meet other tax obligations for the income they earn. All eligible children whose annual income exceeds $1,040 (less interest and dividends) will benefit from the increase.

Children who are under the age of 15, or under the age of 18 and attending primary or secondary school, or who turned 18 in the preceding income year and are still at school, are eligible to receive the rebate.

Application date

The amendment applies for income years corresponding to the 2006-07 and subsequent tax years.