Three tax credits have been axed as they ‘no longer fit the purpose for which they were created’:
- The tax credit for income under $9,880
- The childcare and housekeeper tax credit
- The tax credit for children’s active income
Removal of these tax credits is effective from the current financial year, meaning the last year for their availability through an annual tax return will be the tax year ending 31 March 2012.
To avoid accusations of taxing children’s pocket money the government has replaced the tax credit for children’s active income with a limited income tax exemption for children. This means a child earning under $2,340 per annum from babysitting or mowing the neighbour’s lawn (for example) won’t need to file a tax return.
* Wilco – The 2012 Budget