Taxation on Rent/Dividends Paid to a Third Party?

Does anyone know if the person who owns the underlying asset pays tax or whether the person receiving the income is subject to tax. Albeit it seems materially the same as the person underlying as the one that earns it but then transfers it to the third party, but I've read conflicting material about it.

I would believe that both don't end up paying tax as that would be ludicrous.

Comments

  • What are you doing to have this happen?

    Dividend data will be sent to the ATO under the holder of those shares.

    • I want to pass the rent and dividends directly to my children, as it has become tedious to transfer the amounts manually.

      I just wanted to know if this will cause them to incur tax, it turns out it's fine. :-)

      • Can't you just set up automatic transfers and avoid the issue?

      • If you own the assets and, as you say, you are receiving the income, then obviously you are liable to pay the tax. As far as then passing the income onto your children, in general it’s not a taxable transaction to gift money to your family, but it could become one. If the ATO identifies a regular pattern of income to your children, they may choose to investigate. There are numerous factors that would then determine the outcome. If the money is significant and ongoing, I’d seek advice from a tax specialist

        • My local accountant gave me a really simplified response that if I had paid tax on it once, that it was fine. I don't know if that is true, but I guess I can rely on it.

          • @AntifaBriggs: Not so simple. For example, if you ‘gave’ your children the money, and in return they gave you their labour, like in your business, then it’s actually wages and it’s most certainly taxable

  • Surely be the one who owns it, otherwise I’d have my pay go into my wife’s bank account.

  • Unless the asset is owned by a Trust, which I assume it is not the case. Then the owner bears the taxes.

    I’m not a tax accountant. I would strongly suggest you speak to your accountant if you are serious.

  • You pay tax on your taxable income (assessable income less deductions). Assessable income would include income derived from assets that you own. What you do with that income is then up to you.

    If you gift it to someone under a social / personal arrangement, then generally the person receiving the payment should not have to pay tax as it should not form part of their assessable income, eg, gift to mum. If instead of gifting the money, you instruct the payer to pay mum instead of you then it should be no different. The income earning asset is still owned by you. Instead of receiving the money and paying mum, you have instructed the payer to pay mum direct.

    If on the other hand, you receive the income from the asset and use it to purchase something (eg, good or service), then the payment received by the supplier could be taxable in the hands of the supplier as assessable income. (Also, that expense could be deductible to you if incurred in the course of earning income, eg, repair to the asset). So it depends if the person you are giving the money to is actually supplying something to you in return and if this arrangement is a personal, social arrangement or a business one.
    Sources: https://alignfinancial.com.au/2018/06/06/are-gifts-taxable/ , ATO website. The above should not be taken as advice. As personal facts and circumstances vary, you should seek your own tax advice as appropriate for your situation.

    Hope some of the above helps.