Franked Investment Income under Joint assessment

Carlow52

Was in the pub last night and some guy said that he splits his FII with his wife ' as its more tax efficient'

They are jointly assessed and she has no PAYE income, he has his shares in Mr and Mrs... and divides the FII in 2 for the F11.

What's the benefit here, if any?
Thanks

barneystinson

Ah I love posts that start with

Carlow52 wrote: »

Was in the pub last night and some guy said

I would imagine one benefit would be where the hubby is paying tax at 41%, and if the wife's half of the dividend income would only be taxable at 20%. So the benefit is 21% tax saved on 50% of the dividends. Also, depending on her level of income, she may pay a lower rate of USC on it than the husband.

(Also, AFAIK the term FII refers to dividend income of Ltd Co's - for Income Tax they are simply called distributions / dividends, but I'm splitting hairs!)

Carlow52

100%
Re the FII: thats the wording he used: looking it up it refers to divi income paid by one company to another so as u point out is not the correct wording here.

I would have thought that for joint assessment the increase in the standard rate band for the spouse would only apply if she was working
From
http://www.revenue.ie/en/tax/it/leaflets/it2.html#section9

"The standard rate band for couples in a marriage for 2011 is €41,800 subject to an increase of up to €23,800 where both spouses are working. The increase is limited to the lower of €23,800 or the amount of the income of the spouse with the smaller income."

while from here I read

http://www.revenue.ie/en/tax/it/leaflets/it2.html

"If both spouses have taxable income, they can decide which spouse of them is to be the assessable spouse and request their local Revenue office to allocate the tax credits and standard rate band between them in whatever way they wish. [PAYE tax credit, employment expenses and the basic standard rate band of €23,800 are non transferable.]"


So is it any taxable income for spouse or is it earned income?

smeharg

The first reference is badly worded. It doesn't need to be employment income to avail of the extended rate band.

I don't think this guy is correct in doing this. If the shares are in his name the dividend income is also his. He can't just assign it to his wife. If that were the case couples were one spouse works would assign part of the working spouse's salary to the non-working spouse.

What you can do is make a tax free transfer of the shares between spouses. The respective income from each holding would then be allocated to each spouse.

barneystinson

smeharg wrote: »

I don't think this guy is correct in doing this. If the shares are in his name the dividend income is also his. He can't just assign it to his wife. If that were the case couples were one spouse works would assign part of the working spouse's salary to the non-working spouse.

True, and worth making people aware of, but OP has confirmed...

Carlow52 wrote: »

They are jointly assessed and she has no PAYE income, he has his shares in Mr and Mrs... and divides the FII in 2 for the F11.

smeharg

Ah, now I follow. What he is doing is correct in that case.