Working for Families - dependent child's income

2011 amendment to the Income Tax Act prevents double counting of a dependent child's passive income when calculating family scheme income.

Section MB 11 of the Income Tax Act 2007

Background

The Taxation (GST and Remedial Matters) Act 2010 introduced a more comprehensive definition of "family scheme income". This new definition of family scheme income applies for Working for Families (WFF) tax credits and community services cards for families with dependent children from 1 April 2011.

The new definition of family scheme income includes passive income of a dependent child above a threshold of $500 per annum. The dependent child's passive income is potentially counted twice when calculating a family's combined family scheme income for abatement purposes, once for the principal caregiver and once for their partner.

Key features

Section MB 11 of the Income Tax Act 2007 is amended to prevent double counting of a dependent child's passive income when calculating family scheme income.

The amount of a dependent child's passive income is included in a principal caregiver's family scheme income if the amount exceeds $500 per year. If there is more than one principal caregiver for a child, such as where there is shared care of a dependent child, the amount is divided equally between these people.

Application date

The amendment applies from 1 April 2011.