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Income Tax Act 2007

Tax credits paid in cash - Adjustment of net income for family scheme

MB 11: Family scheme income from amounts derived by dependent children

You could also call this:

“How a child's income affects family income for tax purposes”

This section talks about how money earned by children affects family income for tax purposes. If you are taking care of a child, and that child earns more than $500 in a year from certain types of income, it might change how much family income you have.

The types of income that count for this rule include money from investments, royalties, rent, some types of trust income, and some investment fund earnings.

If the child earns more than $500 from these sources in a year, you need to add some of that money to your family income. You do this by taking the total amount the child earned, subtracting $500, and then dividing by the number of people who are main caregivers for the child.

For example, if a child earned $700 from these sources, and has two main caregivers, you would calculate it like this: ($700 - $500) ÷ 2 = $100. So each caregiver would add $100 to their family income for tax purposes.

This rule helps to make sure that family incomes are calculated fairly when children are earning money too.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM3661995.

Topics:
Money and consumer rights > Taxes
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Part M Tax credits paid in cash
Adjustment of net income for family scheme

MB 11Family scheme income from amounts derived by dependent children

  1. This section applies for the purpose of determining the amount that represents the family scheme income of a person for an income year when the person is a principal caregiver of a dependent child and the dependent child derives in the income year an amount that is—

  2. resident passive income:
    1. a royalty:
      1. rent:
        1. beneficiary income that is not an amount referred to in section HC 35(4)(b)(i), (ii), or (v) (Beneficiary income of minors):
          1. attributed income from a portfolio investment entity that is not a superannuation fund or retirement savings scheme:
            1. a distribution from a listed PIE.

              1. If the total of amounts derived by the dependent child in the income year and referred to in subsection (1) is more than $500, the family scheme income of the person for the income year includes an amount calculated using the formula—

                (child's amounts − $500) ÷ principal caregivers.

                Where:

                • In the formula,—

                • child's amounts is the total of amounts—
                  1. derived by the dependent child in the income year; and
                    1. referred to in subsection (1):
                    2. principal caregivers is the number of people who are each a principal caregiver of the child.

                      Notes
                      • Section MB 11: added, on , by section 112 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                      • Section MB 11(1): amended (with effect on 1 April 2011), on , by section 107(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                      • Section MB 11(2) heading: substituted (with effect on 1 April 2011), on , pursuant to section 107(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                      • Section MB 11(2): substituted (with effect on 1 April 2011), on , by section 107(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                      • Section MB 11(3) heading: added (with effect on 1 April 2011), on , by section 107(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                      • Section MB 11(3): added (with effect on 1 April 2011), on , by section 107(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                      • Section MB 11 list of defined terms principal caregiver: inserted (with effect on 1 April 2011), on , by section 107(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).