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Edited version of your private ruling
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Ruling
Subject: Income of a minor
Question
Is the superannuation pension you receive excepted assessable income for the purposes of Division 6AA of the Income Tax Assessment Act 1936 (ITAA 1936) and taxed at ordinary tax rates?
Answer
Yes.
This ruling applies for the following periods
Year ended 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
The scheme commenced on
1 July 2010
Relevant facts and circumstances
You are under 18 years of age.
As a result of a relative passing away you receive a pension from their superannuation scheme.
You will receive the pension until you turn a pre-determined age or cease full-time education.
Relevant legislative provisions
Income Tax Assessment Act 1936 Division 6AA
Income Tax Assessment Act 1936 Section 102AE
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Summary
The pension you receive is excepted assessable income and will be taxed at ordinary tax rates.
Detailed reasoning
Section 6-5 of the Income Tax Assessment Act 1997 states that an Australian resident taxpayer is liable to pay tax on income derived from all sources whether in or out of Australia, during the income year.
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.
You receive a pension as a result of the death of a relative. A pension of this type is excepted assessable income.
The income you receive forms part of your assessable income and will be taxed at ordinary rates and not under the special rules contained within Division 6AA of the ITAA 1936.