Private ruling: Excepted income
Published: May 2015
Ruling period: Income year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Is the Australian resident minor beneficiary an excepted person for the purposes of Division 6AA of the Income Tax Assessment Act 1936 and therefore the trustee will be assessed at the general individual rates on the income to which they are presently entitled? | A1: Yes

Relevant facts and circumstances: You are a trustee of an Australian resident trust. The trustee has previously made a family trust election to which X is the test individual. The trustee has identified X a beneficiary of the trust and within the "family" under the family trust regime. X is a minor with no Tax File Number issued and is a resident of Australia for income tax purposes. In 20XX X was diagnosed with a medical condition that was life threatening and is receiving ongoing medical care. X parents, are registered for family assistance benefits with Centrelink and are paid a Carers Allowance. X is considered the care receiver and their parents the carers.

Relevant legislative provisions: Income Tax Assessment Act 1936 Division 6AA | Income Tax Assessment Act 1936 Section 102 AC

Reasons for decision: Summary: Division 6AA of the Income Tax Assessment Act 1936 (ITAA 1936) operates to tax certain income derived by minors who are 'prescribed persons' at penalty rates. A minor will be a 'prescribed person' for the purposes of Division 6AA if, in relation to a year of income, they are: • less than 18 years of age on the last day of the income year, and • not an 'excepted person' in relation to the year of income. Subsection 102AC(2) of the ITAA 1936 provides that a person is an excepted person if, on the last day of the income year they were entitled to a disability support pension, or someone was entitled to a carer allowance to care for them. Section 98 of the ITAA 1936 provides that the trustee of a trust is assessed on income to which a beneficiary is presently entitled, but under a legal disability (such as being a minor). As the Australian resident beneficiary meets these requirements, they are considered an excepted person for these purposes and the trustee will be assessed at the general individual rates.