• Skip to main content
  • Skip to primary sidebar
  • Skip to footer
lawyers@rslaw.com.au (02) 9299 4912

Commercial Lawyers & Solicitors | North Shore | Sydney CBD

  • Home
  • Our Story
    • Our Community
    • Our Environment
  • Our Services
    • Business & Commercial
      • Starting A New Business
        • New Business Structures
      • Buying & Selling a Business
        • Corporate Mergers and Acquisitions (M&A)
        • Sale or Purchase of Shares in a Private Company
        • FAQ – Sale of Business
        • FAQ – Purchase of Business
      • Business & Commercial Disputes
      • Corporate Governance & Asset Protection
      • Intellectual Property & IP Law
      • Contract Law
      • Climate Change, Energy Law & Carbon Trading
    • Debt Recovery
      • Debt Recovery Process
      • Enforcing a Debt or Judgment
      • Car Accidents & Motor Vehicle Claims
    • Probate, Estate Administration & Disputes
      • Applying for a Grant of Probate
      • FAQ’s – Contesting or Disputing a Will
      • FAQ’s – Executors and the Administration of Deceased Estates
    • Civil Disputes & Litigation
      • Business & Commercial Disputes
        • Shareholder Disputes
        • Partnership Disputes
        • Director’s Disputes
        • Contract & Property Disputes
      • Litigation
        • Commercial Litigation
      • Negligence
      • Alternative Dispute Resolution (ADR)
    • Divorce & Family Law
      • FAQs – Family Law
      • Separation and Divorce in Australia
        • FAQs – Separating from my spouse
        • FAQs – Divorce
      • Property Orders and Financial Disputes
        • Consent Orders and Binding Financial Agreements
        • FAQs – Property and Financial Matters
        • FAQs – Spousal Maintenance
      • Children, Parenting Orders and Agreements
        • FAQs – Children and parenting matters
        • FAQs – Child Support
      • De facto Relationships and Separation
        • FAQs – De facto relationships
      • Family Court or Federal Circuit Court?
      • Collaborative Family Law
      • FAQs – Seeking advice from a family lawyer
    • Property & Conveyancing
      • Retail & Commercial Leases
      • Selling a Property
        • FAQ – Selling a Property
      • Buying a Property
        • FAQ – Buying a Property
      • Transferring Property in NSW
      • Property Owners Disputes
      • Caveats
      • Mortgages & Securities
      • Option Agreements
      • Electronic Conveyancing in NSW
    • Wills & Estate Planning
      • Drafting a Will
        • Children in Wills
        • Letter of Wishes
        • Digital Assets in a Will
      • Power of Attorney
      • Guardianship & Enduring Guardians
      • Elder Law
      • FAQ’s – Wills and Estates
    • Bankruptcy & Insolvency
      • Personal Bankruptcy
        • Bankruptcy Notices
        • Debt Agreements
        • Enforcing a Debt or Judgment
      • Company Insolvency
        • Creditor’s Statutory Demand
        • Creditor’s Petition
        • Winding Up or Deregistering a Company
    • Building & Construction
      • Building & Construction Contracts
      • Building & Construction Disputes
      • Security for Payments Act
    • Employment Law
    • Insurance Law
    • Public Notary
  • Online Quotes
    • Simple Will Quote
    • Debt Recovery Quote
    • Conveyancing Quote
  • Meet the Team
    • Stephen Rockliff
    • John Snelgrove
    • Nicole Rockliff
    • Dick Herman
    • Michelle Rockliff
    • Anthi Balafas
    • Cristian Fuenzalida
    • Jinny Kim
    • Nathan Rockliff
    • Peter Gell
    • Michael Hutson
  • News & Articles
  • Contact Us
You are here: Home / News / Taxation / Child Maintenance Trusts

Child Maintenance Trusts

Pursuant to section 51.50 of the Income Tax Assessment Act 1997 (Cth), child support payments made by non-custodial parents to, or for the benefit of a child, will generally speaking need to be funded by after-tax income in order to be tax-free to the recipient. As an alternative to making direct payments of child support, non-custodial parents may wish to consider establishing a child maintenance trust, which may in turn provide significant tax savings depending on the circumstances.

Section 51.50 provides:

“Maintenance payments to a spouse or child

(1)  This section sets out the conditions on which a periodic payment, in the nature of maintenance, that:

(a)  is made by an individual (the maintenance payer ); or

(b)  is attributable to a payment made by an individual (also the maintenance payer );

is exempt from income tax under item 5.1 of the table in section 51-30.

(2)  The maintenance payment is exempt from income tax only if it is made:

(a)  to an individual who is or has been the maintenance payer’s * spouse; or

(b)  to or for the benefit of an individual who is or has been:

       (i)  a * child of the maintenance payer; or

       (ii)  a child who is or has been a child of an individual who is or has been a * spouse of the maintenance payer.

(3)  The maintenance payment is not exempt if, in order to make it or a payment to which it is attributable, the maintenance payer:

(a)  divested any income-producing assets; or

(b)  diverted * ordinary income or * statutory income upon which the maintenance payer would otherwise have been liable to income tax.”

Child maintenance trusts are a valid means of satisfying child maintenance payments in a property settlement or divorce. This is accomplished by setting up income-producing property into a trust established to provide child maintenance payments and satisfying a number of conditions, set out in section

The reasons why such trusts are established is that they are exceptionally tax effective, as well as being a certain means of providing child maintenance payments. The tax advantage is primary one of income splitting. The income of such a trust is taxed to the infant beneficiary at normal resident tax rates. In most trust structures, infant beneficiaries would be subject to penalty rates of tax on distributions received in excess of $416 (2018-2019 tax rates).

The savings here are potentially immense, particularly if the tax payer settling the asset into the trust is a top tax rate payer. An infant beneficiary can receive $21,600 from a maintenance trust before paying tax. A tax payer in the top marginal rate of tax would have to apply $40,790 of their pre-tax income to make the same $21,600 payment.

For more information, contact Rockliff Snelgrove Lawyers on (02) 9299 4912.

Primary Sidebar

Search

Categories

  • General
  • Employment Law
  • News
  • Probate, Estate Administration & Disputes
  • Property & Conveyancing
  • Services
  • Superannuation
  • Taxation
  • Uncategorised
  • Wills & Estate Planning
  • Bankruptcy & Insolvency
  • Building & Construction
  • Business & Commercial
  • Civil Disputes & Litigation
  • Debt Recovery
  • Divorce & Family Law
  • General Legal Services
  • Insurance Law

Online Enquiry

* indicates required field

News & Articles

Managing Employees in Australia given the Impact of COVID-19

We stress that due to the unprecedented nature of the pandemic and the very rapidly changing landscape, the guidelines below are general in nature and subject to change. Many of the laws that now apply to this situation were not written with regard to what is currently occurring. Therefore please exercise caution in relying on […]

Temporary Changes to Insolvency Laws in Australia due to the Coronavirus (COVID-19) Crisis

In a move aimed to lessen the economic impact on businesses and individuals caused by the Coronavirus pandemic, the Australian Government has introduced some changes to insolvency laws in Australia that apply to personal and corporate insolvency regimes. This includes a temporary increase to the threshold in which creditors can issue a statutory demand on […]

Coronavirus (COVID-19) Update

Following on from the extensive reporting in relation to the COVID-19 pandemic we have implemented a number of protocols to enable the business to continue operating if a staff member or principal is diagnosed with the virus and/or the office needs to close for a period of time. Our staff and principals have adopted best […]

Footer

The Rockliff Snelgrove Difference

We have lawyers that are Accredited Specialist in Business Law and Family Law
We have over 100 years of combined experience
Our lawyers and consultants are experts in their field to enable us to give you tailored legal advice to suit your specific needs

Contact Us

  • Level 5, 50 King Street

    Sydney NSW 2000

  • (02) 9299 4912

Connect With Us

  • Email
  • Facebook
  • LinkedIn

Translate

Newsletter

Sign up to our newsletter for updates on our latest news, articles and special promotions!

Our website does not give legal advice. All materials are for informational purposes only and should not be relied upon as legal advice. The use of this website is subject to our:
WEBSITE DISCLAIMER – PRIVACY POLICY – TERMS & CONDITIONS OF USE
Liability limited by a scheme approved under Professional Standards Legislation.Copyright © 2020 · Website hosted by Lift Legal · Log out