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Edited version of your written advice

Authorisation Number: 1012813392415

Ruling

Subject: Excepted income

Question

Is the Australian resident minor beneficiary an excepted person for the purposes of Division 6AA of the Income Tax Assessment Act 1936 and therefore the trustee will be assessed at the general individual rates on the income to which they are presently entitled?

Answer:

Yes

This ruling applies for the following period:

Income year ended 30 June 2014

The scheme commences on:

1 July 2013

Relevant facts and circumstances

You are a trustee of an Australian resident trust.

The trustee has previously made a family trust election to which X is the test individual.

The trustee has identified X a beneficiary of the trust and within the "family" under the family trust regime.

X is a minor with no Tax File Number issued and is a resident of Australia for income tax purposes. In 20XX X was diagnosed with a medical condition that was life threatening and is receiving ongoing medical care.

X parents, are registered for family assistance benefits with Centrelink and are paid a Carers Allowance.

X is considered the care receiver and their parents the carers.

Relevant legislative provisions

Income Tax Assessment Act 1936 Division 6AA

Income Tax Assessment Act 1936 Section 102 AC

Reasons for decision

Division 6AA of the Income Tax Assessment Act 1936 (ITAA 1936) operates to tax certain income derived by minors who are 'prescribed persons' at penalty rates. A minor will be a 'prescribed person' for the purposes of Division 6AA if, in relation to a year of income, they are:

Subsection 102AC(2) of the ITAA 1936 provides that a person is an excepted person if, on the last day of the income year they were entitled to a disability support pension, or someone was entitled to a carer allowance to care for them.

Section 98 of the ITAA 1936 provides that the trustee of a trust is assessed on income to which a beneficiary is presently entitled, but under a legal disability (such as being a minor).

As the Australian resident beneficiary meets these requirements, they are considered an excepted person for these purposes and the trustee will be assessed at the general individual rates.

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