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Tax Effective Child Support Trusts

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The breakdown of a marriage (so far as it relates to property settlement and ongoing financial obligations) can be a time when effective tax planning arrangements can be put into place. This is true in relation to ongoing obligations to pay child support where there has been a breakdown of a relationship and a court order has been made to pay child support or it is payable by virtue of a legislative scheme such as under the Child Support Act.

 
The use of a child support trust or child maintenance trust (Trust) in marriage breakdown circumstances is not for everyone but, if your circumstances make it suitable to pay child support or receive child support through a trust of this type, the financial advantages can be enormous.
 
Under normal circumstances, a minor will be taxed at a very punitive rate for any unearned income that is distributed to the child. Provisions of the Tax Act provide for this to prevent income splitting of unearned income to minors.
 
Where a marriage breakdown is involved and there is an obligation as outlined above to pay child support, there is an important exemption provided that certain technical requirements are met. This exemption allows the child to received unearned income at the same tax rates as would apply to an adult. Provided that you meet the criteria for the establishment of such a trust and if you have an obligation to pay child support for a large number of years and/or for a number of children, the tax benefits to you may be very substantial. If you are to receive the benefit of child support, it can mean that the payer can afford to make more substantial payments because they will be tax-effective in the payer's hands.
 
We have the ability to prepare a tax-effective child support trust that will be deemed compliant by the Tax Office provided that your circumstances meet the requirements for these trusts.
 
Call one of our Family Lawyers for free initial telephone advice on your circumstances on 95258688.

Key People

sutherland shire lawyer greg dicksonGreg Dickson 

primary area of practice is litigation. In 1993, he became one of the first solicitors in New South Wales to achieve Accreditation as a Specialist in Family Law and Property Relationships Act Law. Greg is the head of our Family Law Division but also practices extensively in commercial and general litigation ...read more

sutherland shire lawyer kevin dwyerKevin Dwyer 

can advise you upon and conduct all Family Law and De Facto Relationship matters in the Family Courts at Sydney, Wollongong and Parramatta. Kevin can also assist you in Criminal Law and appear in Local Courts all over New South Wales in AVO and criminal proceedings as well as ...read more

Amanda DoringAmanda Doring 

is a Family Law Accredited Specialist with extensive experience drafting binding financial agreements and conducting urgent applications in the Family Court and Federal Magistrate’s Court as well as De Facto proceedings in the Supreme, District and Local Courts ...read more

Lisa O'Leary 

operates predominantly in the area of Family Law and De Facto Relationship dispute resolution in the Family Court, the Federal Magistrates Court, the Local and Supreme Court or by alternative dispute resolution procedures ...read more 

Nicola Morgan 

Nicola joined Warren McKeon Dickson in January 2009 as the recipient of the Warren McKeon Dickson Work Integrated Learning Scholarship offered in conjunction with the University of Wollongong.  ...read more 

 

 

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