Private ruling: Assessability of income of a minor
Published: October 2012
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013
Date scheme commenced: 1 July 2011

Ruling: Q1: 1. Is the interest income received from the investment of monies left to you in the will of a deceased relative 'excepted assessable income' for the purposes of section 102AE of the Income Tax Assessment Act 1936 (ITAA 1936)? | A2: Yes.

Relevant facts and circumstances: You received an inheritance upon the death of a relative, payable when you attain a certain age. You are currently under 18 years of age. Under the will, you are entitled to apply for funds to assist in your maintenance, education or for your benefit. Under a separate agreement between the trustees of the deceased estate, the inheritance monies have now been deposited into separate term deposit accounts for you and your siblings in your own names Interest income is accruing on each of the accounts.

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

Reasons for decision: Summary: Division 6AA of the ITAA 1936 ensures that special rates of tax and a lower tax free threshold apply in working out the basic income tax liability on taxable income, other than excepted income, derived by a prescribed person. A prescribed person is defined in subsection 102AC(1) of the ITAA 1936 to include any person, other than an excepted person (as defined in subsection 102AC(2) of the ITAA 1936), who is under 18 years of age on the last day of the income year. In your case, you are a minor, under 18 years of age, and a prescribed person for the purposes of subsection 102AC(1) of the ITAA 1936. As a prescribed person, Division 6AA of the ITAA 1936 will apply to so much of your assessable income that is not excepted income (subsection 102AE(1) of the ITAA 1936). Subsection 102AE(2) of the ITAA 1936 lists the various types of assessable income of a minor which is excepted assessable income. Under this subsection, assessable income derived by a minor from the investment of any property that devolved upon the minor from the estate of a deceased person, is listed as excepted income. (subparagraph 102AE(2)(c)(i) of the ITAA 1936). In your case, you have received interest income from the investment of monies left to you in the will of a deceased relative. The interest income received from of the investment of these funds will be considered excepted assessable income under subsection 102AE(2) of the ITAA 1936. Therefore, Division 6AA of the ITAA 1936 will not apply to the interest income and it will be taxed at ordinary marginal (adult) rates.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | 2. If the interest income is 'excepted assessable income', is it taxed at ordinary marginal rates?