Minor and rental income

Q&A Tax

Question :

Tony is 15 years old and has recently inherited a share of a rental property. His adult brother helps
manage the property and distributes rental income to him according to his share.

Does Tony have to pay tax at resident minor rates (division 6AA) for the rental income?

 

Answer :

If you are under 18 years old, some of your income may be taxed at a higher rate than an
adult. However, you pay the same individual income tax rates as an adult for:

• all income you receive if you are an ‘excepted person’ – this may apply if you have finished fulltime study and are working full time, have disabilities, or are entitled to a double orphan pension
• income you receive as ‘excepted income’ – this includes your employment or business income,
Centrelink payments and income from a deceased person’s estate.
In this case, Tony is not an excepted person if he has not finished full-time study and are not working
full time, does not have disabilities, or are not entitled to a double orphan pension.

If Tony is not qualified as an excepted person, he still can get access to normal adult tax rate if he
receives excepted income.

Excepted income includes income from property transferred to the minor as a result of death of
another person (eg, rental income from property inherited from a deceased estate) and net capital gain
from the disposal of property inherited from a deceased estate.

As such, these excepted income (Rental income and the share of rental property) earned by Tony
should be taxed at normal adult rates instead of penalty rates.

 

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