Term deposit Interest question RE-TAX

[jetcrew]

Ok been on Google and I wont use any advice as gospel I am just trying to get pointed in the right direction .

I have some money in my bank account and I want to place a term deposit in for 12 mths, but i want my father to benefit from the dividend.

I do not want to take the tax hit and then give him what's left .  My idea is for him to slow down work wise and he can then get a few grand from the dividend as with his earnings and lower income the tax hit would be less than on mine.

Is this even possible or legal ..i mean I know that once I place the term deposit it will be in my name but can you nominate a beneficiary to accept the dividend and the tax liability.

I have a bit of a family situation that makes just putting it all in his name problematic if he came to an untimely end ..if you get my drift ..(I would loose my dough or at best have to fight for it so it needs to stay in my name )

Any advice appreciated ..

i will seek further advice and am just sounding out if its even possible to do what I am thinking) 

Jet

 

[KingBilly]

Mate, I'll do you a favour seeing you are a nice guy.  Whack it in my account and I'll write your old man a cheque for whatever interest it earns.  Deal?

KB

[Bird]

When I got my payout, my arse got ripped by tax savagely... Any interest in my name went against me - so I cant see it being any different for you... I think there is something about 1 off payments but it will go in your name first, and tax will love you then you can send it to dad.. that's how it was explained to me.

Go and speak with financial advisor.

[clarky]

Hi Jet,

The only person who can be assessable for the income is the legal account holder - in your case that would be you. The bank will require a tax file number (or otherwise will withhold tax) and they will report to the ATO on the amount of interest earned on the account.

The only way around this would be to create a Trust with the ability to allocate income earned to whomever the Trustee determines each year. You cold then contribute the money into an account in the name of the Trust. You would appoint yourself as Trustee to maintain control of the property.This would meet your requirements of protecting the capital and allowing the income to pass to your Father, but the set up cost and ongoing tax preparation fees (even though they are deductible) etc could well wipe out the tax benefits.

[Wortho]

You can get 4% in a normal savings account without locking it up in a term deposit (Bankwest etc). Setup an online account in your Dads name but have online access for yourself, that way you can transfer the funds pronto if things go pear shaped.



Cheers
Wortho

[Barry G]

If you are a sole income family you could put it in your wife's name.
Depending on the age of your kids and the amount of interest involved it could create significant tax liabilities if put in their names.

[jetcrew]

Thanks for the replies.. I must state though that i am not trying to avoid paying tax , I just did not want my tax rate being applied when the actual end user is not me.

The whole trust thing seems like a involved and expensive way around it.

the joint on-line account might be better as suggested.

Or just put it all in his name and wrap the old bugger in cotton wool. Or just the higher tax rate and think of it as insurance 

Jet

[Bird]

You can get 4% in a normal savings account without locking it up in a term deposit (Bankwest etc)

Interesting

"If you deposit less than $200 (excluding interest) and/or make a withdrawal in a month you will earn a standard variable interest rate, currently 0.01% p.a.  for that month.
That portion of the balance over $250,000 and up to $5 million will earn a standard variable interest rate, currently 0.01% p.a"

.01%???

[clarky]

Hi Jet,

Just been thinking....without knowing your situation precisely, you could  formally loan him the money and have the loan secured by the deposit. This would guarantee that you get the money back. Any solicitor could draw up the loan agreement and the mortgage.

[Barry G]

Interesting

"If you deposit less than $200 (excluding interest) and/or make a withdrawal in a month you will earn a standard variable interest rate, currently 0.01% p.a.  for that month.
That portion of the balance over $250,000 and up to $5 million will earn a standard variable interest rate, currently 0.01% p.a"

.01%???

This is not an uncommon account strategy with banks.
I have an incentive saver account with BankMECU.  I deposit $50 fortnight and receive bonus interest (paid into the account monthly) of 3.5%.
Up side:  Can withdraw any time I like, interest paid monthly.
Down side: in any month I make a withdrawal I don't receive the bonuses interest.
Last month I received $50 interest, or 50% of what I paid in for the month.

Just need to ensure you take money out no more regularly than about once / year.

[Humphreythebear]

I am not an advisor .?
An option is to put into redraw - no you won't receive any interest as such , but you will shorten your mortgage considerably .
Advantages is that the money is still accessible, you will save money by virtue of reducing your weekly or whatever payments . Then open an account in a child's name and pay a proportion of the monies saved into the account .
The old boy gets the interest at the end . Granted it may not be a huge amount .... Maybe 3% ?

[fishfinder]

buy a bucket load of drugs every $3000 spent you set a return of $7500 wont take long to get your money back and make a nice return for your father- you will still need to get an ABN number for tax reasons but just don't rite out to many receipts - easy

[Wortho]

Interesting

"If you deposit less than $200 (excluding interest) and/or make a withdrawal in a month you will earn a standard variable interest rate, currently 0.01% p.a.  for that month.
That portion of the balance over $250,000 and up to $5 million will earn a standard variable interest rate, currently 0.01% p.a"

.01%???

I have two accounts so if I need to withdraw I do it on the one with lowest balance and try to do it on the first day of the month. That way I only lose the interest on one day and just transfer any balance over to the 2nd account to accrue interest for the other 29 or so days.

[Wortho]

the joint on-line account might be better as suggested.


Jet

A joint account would mean the interest just gets split and what I was referring to is to have only your Dad as the account holder but get yourself added as a signatory so you can act on his behalf.

[jetcrew]

A joint account would mean the interest just gets split and what I was referring to is to have only your Dad as the account holder but get yourself added as a signatory so you can act on his behalf.

Ok will look into that.. thanks mate

Jet

[xcvator]

OMG, Jet, why are you asking about things like this on a camping forum, with all due respect to the members, go and ask an expert, might cost you a few bucks, 2 important points
1/ you will get the latest,correct up to date information
2/ if 1 is wrong you have a legal come back
cheers and good luck 

[Nomad]

What xcavator said.

Ask your accountant about a Blind Trust.
I have them for my kids, literally no paper work. I have invested their  baby bonuses etc into a Vanguard portfolio, which sh!ts all over bank interest by the way and the income is assessed as "theirs" they have had TFN's since I started them just after they were born. I don't know if this is applicable to your father but worth asking.

If you would like my accountants details just PM me........he looks after my personal, businesses and trust accounts and hasn't let me down....I trust him with my financial life so to speak.

Cheers

[jetcrew]

OMG, Jet, why are you asking about things like this on a camping forum, with all due respect to the members, go and ask an expert, might cost you a few bucks, 2 important points
1/ you will get the latest,correct up to date information
2/ if 1 is wrong you have a legal come back
cheers and good luck 

Fair point but as I said I was just after some general ideas so when I speak with someone I will have half an idea. 

Always good to ask around I certainly was not going to run off do something and blame myswag if it all went wrong.

The forum is full of different ppl from differing trades /expertise and i truly believe their is not a single life issue that a member cannot answer or give advice on. shows how diverse the group is.

I have some good points to research now.

thanks to all

jet

[oldmate]

Z

[V8ute]

Dude we know ya got heaps so just give it to him
Catch up soon.
  V8ute

[Paul Mac]

G'day Jet,


Having had 38 years experience in banking and finance I can tell you that you would be liable for tax on any interest income if you are the account holder.

Secondly, placing the funds into your father's name also carries a tax liability with gift tax payable.

Thirdly, if the funds were held in your father's name and something went "pear shaped" depending on the circumstances you may have a problem if another party took legal action against your father. Merely stating that the funds were yours in the first instance wouldn't prevent someone from taking action.

A trust is about the only way of doing what you are proposing.

Hope that helps mate.

Cheers. 

[Andy_Q]

I would think that a loan at zero interest repayable upon demand would keep you capital safe as can be in someone else's bank account. Then however your father uses the money is his return on investment.


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[Jasman]

Secondly, placing the funds into your father's name also carries a tax liability with gift tax payable.

I'm pretty sure there is no gift tax in Australia though Centrelink do have Gifting provisions which you could argue is a tax if it applies.

[McTavish]

Jet - a couple of issues to consider - particularly if your dad is on a Centrelink Pension - if not an he's working then any income is added to his taxable income anyway??

Usual blah blah about this not being advice etc and no one but a registered accountant can give tax advice...   But you could look at these points... when you meet with one to discuss...

1) if you give the money to him it may be considered to be an asset and may decrease pension payment under either the assets or income test.  And you run a massive risk for the fact if he were to pass away, from that moment it becomes part of his estate and with the legal fraternity happy to give anything a go for a $.   Even if you do up a legal agreement (and it's not considered an asset but offset as a liability - it may still be considered under the income test as funds in his name) you will then also have to deal with the executor to claim the repayment of the 'loan' which may take some time if probate needed and what if the will was contested let alone waiting for the tax on the estate to be finalised before money's paid back...   Let alone the risk he spends it all on Black at the casino, pokies a the local or maybe gives it away to some lonely Nigerian bloke named Trixie - ok now my imagination is getting away from me - too late at night.
 
2) if you do a joint account with him then 50% of the funds become his and again assessed for Centrelink assets/income test.  Possible loss of full pension discounts (rates etc).   Not so much of an issue with estate planning as the account is not part of the estate.   Interest then split equally and you pay tax on your part anyway.

3) setting up a discretionary trust may be the closest to protecting your capital and give you the ability to provide the interest to him as a beneficiary - but check the costs of set up and then ongoing admin costs as mentioned if set up with relatively small amount of $'s then not worth it.    Again if interest paid to him via a trust regularly you may find Centrelink claim this under the income test?

4) keeping the Term Deposit with you or your wife (whichever is the lower income earner with the lowest marginal tax rate may be the way to go) and then take a bit of a hit with tax then pay the remaining amount to him.   Again if you pay funds directly to him he is obliged to tell Centrelink of the change over a certain $ value.   Or maybe you pay one of his bills for him?  Private Health/Electricity/Rates?

Big negative nancy here hey...

Moral of the story - as mentioned - see an accountant

[camper48]

 hi all.everone and his dog will tell uthere spin on things.
the only thing to do is go see an accountant or maybe a financial advisor
just my thoughts