When the government introduced its new "Tax on Split
Income" rules, many thought the days of splitting income with
family members were over. But there are still ways to split income
and the best time to consider one of these strategies,
"prescribed rate loan planning," will be coming soon or
may even be now.
Prescribed rate loan planning is a simple and effective strategy
that allows high-income earners to split income with their family
members who earn no, little or even less income, including spouses,
children, grandchildren, more remote issue, parents and even minor
nephews and nieces. The strategy involves a loan of money or assets
by the high-income earning individual directly to one or more
family members facing lower tax rates or, more commonly, to a trust
established for the benefit of such family members. Where in-kind
property is transferred, consideration must be given to the taxes
that may arise on the transfer (discussed further at the end of
