Private ruling: Interest income of a minor
Published: August 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 | Year ending 30 June 2018
Date scheme commenced: 1 July 2011

Ruling: Q1: Will the income earned as a result of investment of your inheritance be classed as excepted income and taxed at normal rates? | A1: Yes.

Relevant facts and circumstances: You and your sibling are minors (under 18 years of age). You have both received funds from your parent's deceased estate. Your inheritance was deposited into individual accounts in equal shares. You have both received interest income from your invested inheritance.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Division 6AA | Income Tax Assessment Act 1936 Sub-paragraph102AE (2)(c)(i)

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Ordinary income has generally been held to include interest income. Special rules under Division 6AA of the Income Tax Assessment Act 1936 (ITAA 1936) apply when calculating the tax payable on income of children or minors (that is persons under the age of 18). Under these rules, certain types of income are taxed at higher rates. However, there are several categories of income, referred to as excepted income, which are excluded from these special rules under section 102AE of the ITAA 1936. In your case, any income earned from the investment of your inheritance meets the requirements under sub-paragraph 102AE(2)(c)(i) of the ITAA 1936 and is excepted income. Therefore, the income earned from the investment of your inheritance will be subject to the normal resident individual taxation rates.

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