Private ruling: Assessable income of minors - excepted persons
Published: December 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you an excepted person in accordance with subsection 102AC(2) of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes

Relevant facts and circumstances: You were under the age of 18 at the relevant year. You commenced employment during the relevant income year and worked through to the end of that year. You are still employed in the position and intend to continue indefinitely. As a requirement of your employment you attended TAFE one day a week for a number of weeks during the year. Your employer pays your wage for the days you attend TAFE and also pays for your tuition fees. You work Monday to Friday and are paid for a minimum of X hours per week. You can be paid up to X hours a week with overtime when you work weekends as well.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 120AA | Income Tax Assessment Act 1936 Section 102AC

Reasons for decision: Summary: There are special rules that apply to the taxation of income received by minors. These rules were introduced to discourage income splitting by diverting income to children. Under these rules 'unearned income' of minors over a certain level is taxed at the highest marginal rate. These rules apply to all persons under the age of 18 unless they fall within a few categories of 'excepted persons'. To be considered an 'excepted person' you must fall within one of the categories listed under subsection 102AC(2) of the ITAA 1936. One of these categories is a minor who is engaged in a full time occupation. | Detailed Reasoning - Full time occupation: A minor will be treated to be engaged in full time occupation if they are either (a) actually engaged in full time occupation on the last day of the income year, or (b) engaged in a full time occupation during the income year for at least three months (not necessarily continuously). If the minor engages in a course of full time education after a period of full time occupation, the period of full time occupation is disregarded in calculating the three months. The Commissioner must be satisfied that one the last day of the income year the minor intends to engage in a full time occupation during the whole or substantial part of the next year and does not intend to undertake full time study during that time. Subsection 102AA(1) of the ITAA 1936 defines occupation as being any office, employment, trade, business, profession, vocation or calling. It does not include a course of education. | Detailed Reasoning - Application to your circumstances: You are employed in a full time position and are paid a full weekly wage. During some weeks you were required to attend one day of training at a TAFE each week. It is considered that the undertaking of such a position is equal to full time employment. The one day a week study at TAFE is simply a requirement of your employment. You have stated that you intend to continue your employment indefinitely. Therefore, you are an excepted person under section 102AC of the Income Tax Assessment Act 1936 and as such any 'unearned income' you receive will not be taxed at the highest marginal rate.

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