tax tips

As a parent or guardian, it’s essential to understand how tax applies to your child’s money. If your child has a savings account or receives other income, you need to know how to help them manage their finances and meet their tax obligations.

Tax can apply to money your child receives, such as bank account interest or dividends from shares.

For tax purposes, a “minor” is an individual under 18 years of age at 30 June of the income year. Special tax rules for minors apply until they no longer meet this definition.

• Special tax rates for minors: For 2024–2025, for income of Australian resident minors:
  • $0 to $416: no tax;
  • $417 to $1,307: 66% of the amount over $416; and
  • over $1,307: 45% of the total income.

• • “Excepted income” and “excepted persons”: If your child’s income is excepted income, or they’re an excepted person, they’re taxed at the same rates as an adult. This means they can usually take advantage of the $18,200 tax-free threshold. Excepted income includes amounts like employment earnings and taxable pensions from Centrelink; excepted persons include children who work full-time, or have certain disabilities.

• Bank account interest: There are specific thresholds for children under 16, until the end of the calendar year they turn 16:
  • Interest under $120 per year: Financial institutions generally won’t withhold tax.
  • Interest between $120 and $420 per year: If the bank has the child’s date of birth or Tax File Number (TFN), tax usually won’t be withheld, and a tax return isn’t needed for this income alone.
  • Interest of $420 or more per year: If a TFN is provided, tax won’t be withheld. Otherwise, the bank will withhold tax at 47%. For children aged 16 or 17 earning $120 or more in interest, providing their TFN prevents tax withholding.

This depends on who the ATO considers the owner of the income. If you (the parent or guardian) provide the funds, control how they’re used and spend the earnings, that income is generally considered yours and should be declared on your tax return.

Your child may need a separate tax return if:

• the income’s genuinely theirs and tax has been withheld (eg from bank interest or dividends because no TFN was provided), and you want to claim a refund;
• for share income specifically, if your child owns the shares and their dividend income (plus any other income that needs to be declared) is more than $416 for the year, a tax return must be lodged on their behalf. Even if it’s $416 or less, a return can be lodged to claim refunds of tax withheld or franking credits; and

• generally, if their total “non-excepted income” (income subject to the higher minor tax rates) exceeds $416, a return is needed.

Managing your child’s financial beginnings and helping them learn to handle their money is an important process. Understanding these tax aspects can help ensure everything’s set up for them correctly.

To be eligible to claim working from home (WFH) expenses, you need to be genuinely working from home to fulfil your employment duties, not just checking emails or taking occasional calls. You must also incur additional running expenses because of your WFH arrangement. These additional costs can typically include energy expenses for heating, cooling and lighting, home and mobile internet or data, phone expenses, and stationery or office supplies.

When it comes to calculating your deductions, you can choose the “fixed rate method” or the “actual cost method”. For both methods, you’ll need records that accurately track your WFH hours. You can keep a diary or timesheets covering a representative four-week period showing your usual work pattern, or you can maintain a record of your entire year’s WFH hours. You’ll also need documentation showing you’ve incurred additional expenses, such as receipts and bills, and be able to demonstrate the proportion that relates to work.

The fixed rate method simplifies your calculations by applying a set rate for each hour you work from home. For the 2024–2025 income year, this rate is 70 cents per hour. To calculate your deduction, simply multiply your total WFH hours by 70 cents. Remember, if you choose this method, you can’t claim additional separate deductions for expenses already covered under the fixed rate method, such as stationery supplies.

The actual cost method requires you to keep detailed records of all additional costs incurred while working from home. You’ll need to track your WFH hours and maintain comprehensive records for all your WFH expenses.

It’s important to understand what you can’t claim when working from home. This includes items your employer might provide at the office, such as tea or coffee or other general household items. You also can’t make a claim for employer-provided laptops or mobile phones, or expenses which your employer has reimbursed.

You can make separate claims for expenses not covered by either of the above methods, such as work-related technology and office furniture like chairs, desks, computers and bookshelves, as well as repairs or maintenance on these items.

If you use depreciating assets for both work and personal purposes that cost more than $300, you’ll need to calculate the work-related proportion and only claim that percentage as a deduction for the decline in value over the effective life of the item. For items costing $300 or less, such as keyboards or computer mice, you can claim an immediate deduction in the year of purchase rather than depreciating them over time.

For a work-related expense to be deductible, it must directly relate to earning your income.

The ATO has shared some recent eyebrow-raising work-related expense claims that were rejected: a mechanic tried to claim an air fryer, a microwave, two vacuum cleaners, a TV, and gaming equipment; and, even more ambitiously, a fashion industry manager claimed over $10,000 in luxury clothing and accessories in order to be “well presented” at work and events, dinners and functions.

Music can be a powerful tool in creating the right atmosphere for your business. However, it’s important to understand that most music is legally protected by copyright, meaning businesses need permission or a licence to play it in public settings.

When music is played in public spaces like businesses, it’s considered a public performance, which requires permission from the copyright owners. This is different from playing music at home, where no licence is needed. Failing to comply with this requirement can lead to legal action and potentially hefty fines. In fact, in 2018, a Melbourne bar owner was ordered to pay nearly $200,000 in damages for playing music without the proper licence.

Getting a music licence can be straightforward. The most efficient option is to obtain a licence through a music rights organisation such as OneMusic, which is a joint initiative of APRA AMCOS (the Australian Performing Rights Association and Australasian Mechanical Copyright Society) and PPCA (the Phonographic Performance Company of Australia).

OneMusic can provide a single licence covering the majority of commercially available music. A public performance music licence is the most common when playing music for customers or staff in businesses like shops, bars, cafes, gyms and salons.

The cost of a music licence varies based on your business type, size and how you use the music. Licences can start as low as $100 per year for small businesses, like a retail store under 50 square metres playing radio or TV. Larger businesses or those using streaming services may pay more.

Some small businesses may qualify for a complimentary licence as long as they employ fewer than 20 people; play music only through one radio or TV device, or via employee headphones; and, importantly, don’t play music for customers or the general public.

Music licence fees, like other business expenses, can generally be claimed as a tax deduction as long they are directly related to earning your assessable income.

By obtaining a licence, you ensure that music creators are compensated for their work. Licence fees collected by OneMusic are distributed to the rights holders, supporting songwriters, composers, and performers.

To ensure compliance, review the type of music you play and the source. If you use music from a background music supplier, check if they cover your OneMusic licence fees. If not, or if you use music from other sources, you’ll need to obtain a licence directly. Also, if your business has multiple locations, each one must be licensed.