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Edited version of your private ruling
Authorisation Number: 1012565738189
Ruling
Subject: Taxation of income
Question
Is your interest and rental income treated as excepted income for the purposes of Division 6AA of the Income Tax Assessment Act 1936 (ITAA 1936)?
Answer
Yes.
This ruling applies for the following periods
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
The scheme commenced on
1 July 2012
Relevant facts
You are a minor.
Your parent died in 20XX and you were the sole beneficiary of the superannuation fund. This resulted in you receiving a sum of money.
This money was placed in a bank account where you received interest income.
Recently these funds were used to purchase an investment property of which you are the beneficial owner, and you receive rent income.
Relevant legislative provisions
Income Tax Assessment Act 1936 Division 6AA
Income Tax Assessment Act 1936 subsection 102AC(1)
Income Tax Assessment Act 1936 subsection 102AC(2)
Income Tax Assessment Act 1936 subsection 102AE(1)
Income Tax Assessment Act 1936 subparagraph 102AE(2)(b)(v)
Reasons for decision
Division 6AA of Part III of the ITAA 1936 imposes special rates of tax on prescribed persons in respect of eligible taxable income.
Subsections 102AC(1) of the ITAA1936 states that a prescribed person is a person who is less than eighteen years of age and is not an excepted person as defined in subsection 102AC(2) of the ITAA 1936.
In your situation, you are a person who is less than eighteen years of age and your situation does not satisfy any of the circumstances described in subsection 102AC(2) of the ITAA 1936. Therefore you are not an excepted person, you are a prescribed person.
A prescribed person's assessable income is taxed at the highest marginal tax rate, unless it is excepted assessable income where it is taxed at ordinary rates.
Subsection 102AE(1) of the ITAA 1936 states that the eligible assessable income of a person is so much of the assessable income that is not excepted assessable income.
Subparagraph 102AE(2)(b)(v) of the ITAA 1936 states that excepted assessable income of a minor, is the amount that is derived by the minor from the investment of any property transferred to the minor directly as the result of the death of another person and out of a provident, benefit, superannuation or retirement fund.
In your situation, you received a payment from a superannuation fund on the death of your parent, which was held in a bank account and has been subsequently used to purchase an investment property.
Your interest and rental income is excepted assessable income and accordingly, Division 6AA of the ITAA 1936 does not apply in your case, and your income should be taxed at normal individual rates.
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