Private ruling: Excepted Income
Date of advice: 5 December 2025
Published: 27 January 2026
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Does the Commissioner have the discretion to exempt the minors from tax on the current and future interest income? | A1: No.

Relevant facts and circumstances: Taxpayer A Is XX years old and has earned $XXX in interest with withholding tax of $XXX. A draft tax return was completed and the estimated tax payable of over $XXX. The taxpayer's parent did not provide the tax file number to the bank and the bank withheld tax (WHT) of 47%, and this was corrected and some of the income was not subject the WHT. Just started casual work. Taxpayer B Is XX years old and has his gifts received from relatives saved by the parent. Not working yet. Just opened a bank account. Taxpayer C Is XX years old. Does temporary work as XXX. Recently opened their own bank account with plans to transfer the cash from another account. Other Background facts: The total amount balance was kept jointly with the total estimated amount with manually calculated interest after the bank interest earned plus cash received is $XXX. The money received is an accumulation of income from baby bonus, XXX allowances, gifts for their birthdays, Christmas and from relatives in Australia and overseas. A summary has been provided outlining how much each taxpayer has received. The amounts were used to assist in the mortgage payments; this money was kept in the mortgage offset account to offset the borrowed interest and give the regular interest to the three taxpayers in return. The money received is an accumulation of income from baby bonus, parental allowances, gifts for their birthdays, Christmas and from relatives in Australia and overseas. A summary has been provided outlining how much A, B, and C has received.

Relevant legislative provisions: Division 6AA of the Income Tax Assessment Act 1936 section 102AC (1)(2)

Reasons for decision: Summary: Division 6AA of the Income Tax Assessment Act 1936 (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. Section 102AC (1) of the ITAA 1936 outlines that - A person is a prescribed person in relation to a year of income if: (a) that person is less than 18 years of age on the last year, on 30 June and (b) is not an excepted person in relation to the year. Subsection 102AC (2) of the ITAA 1936 specifies that, for Division 6AA purposes, a minor is an 'excepted person' in relation to a year of income only if one or more of the following conditions is met by them: • engagement in full-time occupation • in receipt of a carer's allowance or disability support pension • principal beneficiary of a special disability trust • double orphan pension was payable to them In this case, child A, B and C are minors, under 18 years of age, and are prescribed persons for the purposes of subsection 102AC (1) of the ITAA 1936. You are not an excepted persons for the purposes of subsection 102AC (2) as none of the above conditions apply. The Division 6AA of the Income Tax assessment Act 1936 (ITAA 1936) will apply to you as prescribed persons in relation to the year of income. You will be subject to the special tax rates, the higher tax rates for minors unless they are identified as earning excepted income. Some examples of excepted income are: • Employment or business income • Certain government payments or pensions such as Centrelink payments • Deceased estate income distribution Minors are subject to special tax rates unless they are excepted persons or part of their total taxable income is deemed "excepted income, some of which are listed above. If it is excepted income, the minor is not charged at the higher tax rates imposed by the Income Tax Rates Act 1986 on minors. In your case, A, B and C have not earned excepted income, therefore the interest income will be included as assessable income in their respective tax returns. Section 102 AE(2), an amount included in the assessable income of a minor is excepted assessable income to the extent to which it is specifically excluded. Interest income is specifically excluded and is termed eligible assessable income. The Division 6AA specifically outlines that: "Genuine monetary gifts received by a child on special occasions such as birthdays or religious events are not assessable. However, if the child is a " prescribed person " for the purposes of Div 6AA, any interest earned on the accumulation of such gifts is considered by the Tax Office to be " eligible assessable income " and, as such, taxable at the higher rates applicable under Div 6AA. Interest from accumulated gifts does not fall into any of the categories of " excepted assessable income ". Division 6AA has rules that, in effect, tax income derived by children at the top marginal rate, unless the income falls within certain excepted categories. In your circumstances, the interest income derived from the deposited funds is not excepted income. To the extent the income is derived from the investment of the funds from other sources, those earnings are eligible taxable income under the provisions of Division 6AA of the ITAA 1936 and taxed at the special rates of tax for such income as set out in the Income Tax Rates Act 1986 (section 13, schedule 11 for resident taxpayers). Taxation Determination TD 2017/11 Income Tax: who should be assessed to the interest on bank accounts? distinguished that once the funds in a savings bank account have the minor have the beneficial ownership of the money in the account, it is therefore assessable by the taxpayer. However, due to being under 18 years old, they are subject to the higher rates of tax under the rules of Division 6AA of Part III of the ITAA 1936. In your case, child A, B and C will have their interest income from their respective bank accounts and be the beneficial owners of the interest income. Further guidance is provided regarding the anti-avoidance aspect of the income taxation of minors go to ato.gov.au and search QC 72116. Income of minors is subject to special rules, and they may pay tax on certain types of income at a higher rate. These rules were introduced to discourage adults from diverting income to their children. The Commissioner has no discretion to exempt A, B and C from tax on the current and future interest income. The interest income should be declared in each personal income tax return, to be assessed at the top marginal rate.