Private ruling: Rental income - minor
Published: October 2012
Ruling period: Year ended 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2011

Ruling: Q1: Will the investment income you receive be taxed at the ordinary tax rates? | A1: Yes.

Relevant facts and circumstances: You are under 18 years of age. You received an inheritance. The inheritance will be invested in income producing investments. The investments will be held in your name, where possible, or in your relative's name as trustee for you. Some of the income produced from the investments will be used for your benefit only and the remainder of the income will be reinvested. You will gain control of the inheritance and the investments on your 18th birthday.

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

Reasons for decision: Summary: The investment income you receive is considered to be excepted assessable income and will be taxed at ordinary tax rates. | Detailed Reasoning - Detailed reasoning: Special rules under Division 6AA of the ITAA 1936 apply when calculating the tax payable on income of children or minors (that is, persons under the age of 18). The rules were introduced to discourage income-splitting by means of the diversion of income to children, but they are not confined to situations where income-splitting is involved. Several categories of minors are excluded from the special rules. These minors are called excepted persons and include: · minors employed in a full time occupation · an incapacitated child in respect of whom a carer allowance or a disability support pension was paid, or would, but for eligibility tests, be payable, and · a double orphan or a permanently disabled person, provided they are not dependent upon a relative for support. Even though a minor may not be an excepted person, ordinary rates of tax still apply to certain types of income. Such income is called excepted assessable income and includes: · employment income · taxable pensions from Centrelink or the Department of Veterans Affairs · compensation, superannuation or pension fund benefits as a result of the death of another person · income from a deceased persons estate · income from property transferred to a minor as a result of the death of another person or family breakdown, or income in the form of damages for an injury they suffered · income from their own business · income from a partnership in which they were an active partner · net capital gains from the disposal of any property or investments listed above, and · income from the investment of any of the amounts listed above. The income you earn from investments held by yourself or on your behalf will be considered to be excepted assessable income as it is the investment of income from property transferred to a minor as the result of the death of another person. As the investment income is accepted assessable income it will be taxed at ordinary rates and not under the special rules contained within Division 6AA of the ITAA 1936.

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