Private ruling: Income of a minor
Published: March 2014
Ruling period: Year ended 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2012

Ruling: Q1: Is the annual payment you receive from your late relative's employer assessable? | A1: Yes


Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2)

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Ordinary income has generally been held to include 3 categories, namely, income from rendering personal services, income from property and income from carrying on a business. Other characteristics of income that have evolved from case law include receipts that: · are earned · are expected · are relied upon; and · have an element of periodicity, recurrence or regularity. An amount paid to compensate for loss generally acquires the character of that for which it is substituted ( Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540; (1952) 10 ATD 82); (1952) 5 AITR 443). Compensation payments which substitute income have been held by the courts to be income under ordinary concepts ( Federal Commissioner of Taxation v. Inkster (1989) 24 FCR 53; 89 ATC 5142, (1989) 20 ATR 1516); Case Y47 (1991) 22 ATR 3422; 91 ATC 433). Taxation Determination TD 92/133 states that compensation paid under a federal workers compensation act is assessable to the child of the deceased employee. TD 92/133 is not confined to payments made under federal legislation but can also be applied to other accident or compensation legislation that applies to dependent children of a deceased parent. A compensation amount based on previous salary and wages essentially has the nature of the salary and wage income it replaces (Taxation Ruling TR 95/35). The income would be assessable on a receipts basis in accordance with TR 98/1. In your case, you will be receiving an annual payment in respect of the loss of your relative. These payments retain the characteristics of income as they are expected, relied upon and are have the element of recurrence or regularity and are fully assessable as ordinary income. The fact that the payment is received in a lump sum does not alter the character as ordinary income. The payment is therefore included in your assessable income under subsection 6-5(2) of the ITAA 1997.

Relevant facts: Your relative was killed in a workplace accident and due to this accident and the fact you are a minor, you will be receiving an annual payment from your late relative's employer. | The amount is a percentage of your late relative's wage. | You will receive this wage until you leave school or gain fulltime employment. | You received a payment summary that's shows a gross payment with no tax withheld for the relevant income year. | This is not a payment from Workcover.