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Draft Taxation Determination

TD 93/D108

Income tax: are monetary gifts received by a child or any interest earned on investing such money treated as 'excepted assessable income'?

  • Please note that the PDF version is the authorised version of this draft ruling.
    This document has been finalised by TD 93/148.

FOI status:

draft only - for comment

Preamble

Draft Taxation Determinations (TDs) present the preliminary, though considered, views of the ATO. Draft TDs may not be relied on; only final TDs are authoritative statements of the ATO.

1. No. Genuine monetary gifts received by a child on special occasions such as birthdays or religious events are not assessable for any purpose of the Income Tax Assessment Act. Provided that the child is a "prescribed person" under section 102AC of the Act, any interest earned on the accumulation of such gifts is treated as "eligible assessable income" in terms of subsection 102AE(1) of the Act. Such interest is taxed at the higher rates applicable under Division 6AA.

2. Subsection 102AE(2) of the Act sets out the limited circumstances in which certain forms of income are deemed to be "excepted assessable income". Interest from accumulated gifts does not fall into any of the categories, as set out in that subsection. In particular, paragraph 102AE(2)(f), which refers to accumulations of excepted income, has no application to interest earned on monetary gifts.

Example

Raymond, aged 14, has accumulated $7,000 over the years from birthdays and other special occasions. The money was put into his bank account and he earned $490 in interest during the year ending 30 June 1992. Raymond, who is a "prescribed person" for the purposes of Division 6AA, earned no other income during that year. The total amount of interest earned is treated as "eligible assessable income" as it does not fall under any of the categories of "excepted assessable income" under subsection 102AE(2) of the Act. In this case, the tax payable for the year ended 30 June 1992 would be ($490 - $416) x .66 = $48.84.

Commissioner of Taxation
29 April 1993

References


BO SSO

ISSN 1038-8982

Related Rulings/Determinations:

IT 330
IT 2486
IT 2489

Subject References:
children's income
gifts
exempt income
excepted assessable income

Legislative References:
ITAA 25(1)
ITAA 102AC(2)
ITAA 102AE(1)
ITAA 102AE(2)
Income Tax Rates Act (1986) s.13

Case References:
Case Y23
91 ATC 265


AAT Case 6920
(1991) 22 ATR 3176


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