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Edited version of your private ruling
Authorisation Number: 1012345242422
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Ruling
Subject: Assessability of income of a minor
Questions:
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)?
Answer:
Yes.
2. If the interest income is 'excepted assessable income', is it taxed at ordinary marginal rates?
Answer:
Yes.
This ruling applies for the following period
Year ending 30 June 2012
Year ending 30 June 2013
The scheme commenced on
1 July 2011
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
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.
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