Income Tax Assessment Act 1936

PART III - LIABILITY TO TAXATION  

Division 6AA - Income of certain children  

SECTION 102AE   ELIGIBLE ASSESSABLE INCOME  

102AE(1)   [Eligible assessable income]  

For the purposes of this Division, the eligible assessable income of a year of income of a person is so much of the assessable income of the person of the year of income as is not excepted assessable income.

102AE(2)   [Excepted assessable income]  

Subject to this section, an amount included in the assessable income of a person (in this subsection referred to as the minor ) is excepted assessable income to the extent to which the amount:

(a) is employment income or business income;

(b) is derived by the minor from the investment of any property transferred to the minor:

(i) by way of, or in satisfaction of a claim for, damages in respect of:

(A) loss by the minor of parental support; or

(B) personal injury to the minor, any disease suffered by the minor or any impairment of the minor's physical or mental condition;

(ii) pursuant to any law relating to worker's compensation;

(iii) pursuant to any law relating to the payment of compensation in respect of criminal injuries;

(iv) directly as the result of the death of another person and under the terms of a life assurance policy;

(v) directly as the result of the death of another person and out of a provident, benefit, superannuation or retirement fund;

(vi) directly as the result of the death of another person by an employer of the deceased person;

(vii) out of a public fund established and maintained exclusively for the relief of persons in necessitous circumstances; or

(viii) as the result of a family breakdown (see section 102AGA );

(c) is derived by the minor from the investment of any property:

(i) that devolved upon the minor from the estate of a deceased person;

(ii) that was transferred to the minor by another person out of property that devolved upon that other person from the estate of a deceased person and was so transferred within 3 years after the date of the death of the deceased person; or

(iii) that was acquired by the minor as the beneficial owner of a verifiable prize in a legally authorized and conducted lottery;

(d) not being business income, is included in the assessable income of the minor under section 92 ;

(e) is included in the assessable income of the minor under section 97 or 100 ; or

(f) is derived by the minor from the investment of any property that, in the opinion of the Commissioner, represents accumulations of:

(i) excepted assessable income derived by the minor during a year of income in relation to which this Division applies;

(ii) assessable income derived by the minor during a year of income in relation to which this Division does not apply, being assessable income that would, in the opinion of the Commissioner, have been excepted assessable income if this Division were applicable in relation to the year of income during which the assessable income was derived; or

(iii) exempt income derived by the minor to which subparagraph (i) or (ii) would, in the opinion of the Commissioner, apply if that exempt income had been assessable income.

102AE(3)   [Interpretation - subsection (2)(d)]  

A reference in paragraph (2)(d) to an amount (not being business income) that is included in the assessable income of a person under section 92 in respect of the individual interest of the person in the net income of a partnership shall be read as a reference to so much of an amount so included in that assessable income as, in the opinion of the Commissioner, is attributable to so much of the assessable income of the partnership as would, in the opinion of the Commissioner, have been excepted assessable income if the assessable income of the partnership had been derived by that person.

102AE(4)   [Interpretation - subsection (2)(e)]  

A reference in paragraph (2)(e) to an amount included in the assessable income of a person under section 97 or 100 shall be read as not including a reference to any part to which this Division applies of an amount included in that assessable income under either of those sections.

102AE(5)   [Interpretation - subsection (2)(a)]  

Subject to subsections (6) and (7), a reference in paragraph (2)(a), in relation to a person (in this subsection referred to as the minor ), to business income shall, in relation to any business income derived by the minor during a year of income from the carrying on of a business, be read as a reference to:

(a) in a case where during the year of income, the business was carried on by the minor either alone or in partnership with another person who was, or other persons each of whom was, under the age of 18 years on the first day of the year of income - so much of that business income as the Commissioner considers fair and reasonable having regard to:

(i) the extent to which, during the year of income, the minor had the real and effective conduct and control of the business and participated in the operations and activities of the business;

(ii) the extent to which the minor had the real and effective control over the disposal of income derived by the minor from the business during the year of income;

(iii) the extent to which the capital of the business consisted of property contributed by the minor, being property the income from which would, in the opinion of the Commissioner, be excepted assessable income in relation to the minor; and

(iv) such other matters (if any) as the Commissioner thinks fit; and

(b) in any other case - the amount that, in the opinion of the Commissioner, is reasonable remuneration by way of salary or wages for any services rendered by the minor during the year of income in the production of assessable income of the business increased by such amount (if any) as, in the opinion of the Commissioner, is reasonable, having regard to the extent to which the capital of the business consisted of property contributed by the minor the income from which would, in the opinion of the Commissioner, be excepted assessable income in relation to the minor.

102AE(6)   [Non-arm's length transactions]  

Subject to subsection (7), if any 2 or more parties to:

(a) the derivation of the excepted assessable income mentioned in subsection (2); or

(b) any act or transaction directly or indirectly connected with the derivation of that excepted assessable income;

were not dealing with each other at arm's length in relation to the derivation, or in relation to the act or transaction, the excepted assessable income is only so much (if any) of that income as would have been derived if they had been dealing with each other at arm's length in relation to the derivation, or in relation to the act or transaction.

102AE(7)   [Arrangements to secure income not eligible assessable income]  

Subsection (2) does not apply in relation to assessable income derived by a person directly or indirectly under or as a result of an agreement that was entered into or carried out by any person (whether before or after the commencement of this subsection) for the purpose, or for purposes that included the purpose, of securing that that assessable income would not be eligible assessable income.

102AE(8)   [Incidental purpose disregarded]  

In determining whether subsection (7) applies in relation to an agreement, no regard shall be had to a purpose that is a merely incidental purpose.

102AE(9)   [Interpretation - subsection (2)(b)]  

Where:

(a) any assessable income is derived by a person from the investment of any property transferred to the person by way of, or in satisfaction of a claim for, damages in respect of:

(i) loss by the person of parental support; or

(ii) personal injury to the person, any disease suffered by the person or any impairment of the person's physical or mental condition; and

(b) that property was transferred to that person otherwise than in pursuance of an order of a court;

paragraph (2)(b) applies only to so much (if any) of that assessable income as the Commissioner considers fair and reasonable.

102AE(10)   [Interpretation - subsection (2)(c)(ii)]  

Where:

(a) the assessable income of a person (in this subsection referred to as the minor ) of a year of income:

(i) includes an amount derived by the minor from property that:

(A) was transferred to the minor by another person out of property that devolved upon that other person from the estate of a deceased person; and

(B) was so transferred within 3 years after the date of the death of the deceased person;

but does not include any amount that:

(C) was derived by the minor from property that devolved upon the minor from the estate of that deceased person; or

(D) is included in the assessable income of the minor under section 97 or 100 in respect of the share of the minor of the net income of a trust estate that resulted from a will or codicil of that deceased person, an order of a court that varied or modified the provisions of a will or codicil of that deceased person, a partial intestacy of that deceased person or an order of a court that varied or modified the application, in relation to the estate of that deceased person, of the provisions of the law relating to the distribution of the estates of persons who die intestate; or

(ii) includes an amount derived by the minor from property that:

(A) was transferred to the minor by another person out of property that devolved upon that other person from the estate of a deceased person; and

(B) was so transferred within 3 years after the date of death of the deceased person;

and also includes an amount or amounts to which sub-subparagraph (i)(C) or (D) applies; and

(b) the amount to which subparagraph (a)(i) applies or the sum of the amounts to which subparagraph (a)(ii) applies, as the case may be, exceeds the amount that, in the opinion of the Commissioner, would have been included in the assessable income of the minor of the year of income in respect of an amount or amounts derived by the minor from property that, in the opinion of the Commissioner, would have devolved upon or for the benefit of the minor from the estate of that deceased person if that deceased person had died intestate;

the amount of the assessable income of the minor of the year of income that would, apart from this subsection, have been excepted assessable income by virtue of subparagraph (2)(c)(ii) shall be reduced by the amount of that excess.