Child Rebate - 2013 Tax Year 

Grange Associates Ltd - 25 May 2012

Budget 2012 replaces the tax rebate for children by a limited tax exemption.  The new exemption means that children will not need to pay tax on up to $2,340 of income which is not taxed at source (such as money from mowing lawns or babysitting).  This new exemption does not allow a child to claim a refund of tax that has already been paid, such as PAYE and Resident Withholding Tax.

If a child earns more than $2,340 annually from income which is not taxed at source, the new exemption will not apply to any of the income.  The child would have to pay tax on the full amount.

The eligibility criteria for the new exemption remain the same as the previous child rebate.  That is, it is available to people who:

- Are 14 or under, or
- Are 15, 16 or 17 and still attending school, or
- Turned 18 on or after 1 January in the previous tax year and continued
  to attend school

These changes take effect from the 2013 tax year.  Taxpayers can still make claims for the 2012 tax year, as outlined in this article.

Transitional Rules

As employers can currently choose not to deduct PAYE from school child employees who are expected to have a total annual income below $2,340, transitional rules have been put in place to deal with this.

For school children earning under $2,340 annually, employers are not required to deduct PAYE from their wages until 31 March 2013.  In effect, for the 2013 year, the child will still receive the same rebate as previous years.  In future years, however, the employer would be required the deduct PAYE and the child would not be entitled to a refund of this.

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All information is correct at the date of article publication. Please note we provide the information as a service only. Accordingly, the contents are not intended as a substitute for specific professional advice and should not be relied upon for that purpose.   

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