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Edited version of private advice
Authorisation Number: 1012685678806
Ruling
Subject: Child income from Transport Accident Commission
Question:
Are the income benefits paid to you from the Transport Accident Commission excepted income under subsection 102AE(2) 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 ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
Year ending 30 June 2019
The scheme commences on:
1 July 2012
Relevant facts and circumstances
You are receiving periodic payments from the Transport Accident Commission in relation to your deceased parent and will do so until you turn 18 years old.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 102AE
Reasons for decision
Under Division 6AA of the Income Tax Assessment Act 1936 (ITAA 1936), special higher rates of tax apply to certain income derived by prescribed persons who are under 18 years of age (referred to as minors).
However, subsection 102AE(2) of the ITAA 1936 sets out the limited circumstances in which certain forms of income are deemed to be 'excepted assessable income'. If income is excepted assessable income it is taxed at normal rates and the higher rates of tax under Division 6AA do not apply.
Subsection 102AE(2) states that excepted assessable income includes 'employment income'.
Taxation Determination TD 92/133 deals with the application of Division 6AA to weekly compensation payments made under workers' compensation legislation to a dependent child of a deceased employee (who died as a result of an accident). It states:
We consider that weekly compensation payments…are received in the form of a pension and are therefore within…the definition of 'salary or wages'…the compensation payments are therefore employment income and the special rates of tax set down in Division 6AA do not apply.
Periodic payments made under other accident or compensation legislation (e.g. section 59 of the Transport Accident Act 1986) to dependent children of deceased persons are also considered to be a pension and are taxed at normal rates.
In your case, your income benefits paid to you from the Transport Accident Commission are pension or employment income and thus excepted income under subsection 102AE(2) of the ITAA 1936.