Is Person A an excepted person for the purposes of section 102AC of the Income Tax Assessment Act 1936?
Yes. This ruling applies for the following period: 1 July XXXX to 30 June XXXY (a five-year period) The scheme commenced 1 July XXXX
1. Person A is permanently disabled and requires 24-hour care. Person A suffers from a severe form of Condition B. Children with this medical condition have a limited life-expectancy. 2. Person A's date of birth is XX XXXX XXXX (he or she is under 18 years old). 3. The applicant has supplied a medical certificate (dated during the XXXX income year) issued by Medical Professional C certifying that Person A is a disabled child within the meaning of Part 2.19 of the Social Security Act 1991. 4. Medical Professional C is a qualified practicing medical practitioner. • Medical practitioners seeking to practice medicine in Australia must have completed approved medical courses and be registered with the Medical Board of Australia. [1] • Medical Professional C's medical certificate shows he or she is a practicing medical professional in Australia with relevant medical qualifications. • Medical Professional C is registered with the Medical Board of Australia as a registered medical practitioner. [2]
5. Person A continues to suffer from his or her medical condition - there has been no significant change to his or her medical condition since Medical Professional C issued the certificate.
Section 102AC of the Income Tax Assessment Act 1936.
In these reasons, Division 6AA, section 102AC, and section 98 are in the Income Tax Assessment Act 1936. Question Is Person A an excepted person for the purposes of section 102AC ? Summary Yes. Person A is an excepted person under section 102AC because he or she meets the conditions in paragraph 102AC(2)(d). The Commissioner has received a certificate from a qualified medical practitioner certifying that Person A is a disabled child for social security purposes. The Commissioner is also satisfied that he or she will be a disabled child in that sense throughout the ruling period. Detailed reasoning 1. Broadly, minors may be taxed at high marginal tax rates if they are covered by Division 6AA. The effect of section 13 of the Income Tax Rates Act 1986 (together with the Schedules to that Act) is that specified tax rates will apply to certain amounts of Division 6AA income. Very broadly, these tax rates apply both to: • the taxable income of prescribed persons for the purposes of Division 6AA, and • the trustee of a trust estate liable to be assessed and to pay tax under section 98 [3]
in respect of a part of the net income of the trust estate to which Division 6AA applies. 2. Division 6AA applies to income (including income from a trust estate) for people under 18 unless exceptions apply. • The effect of subsection 102AG(1) is that Division 6AA applies to the beneficiary's share of the net income of the trust estate where that beneficiary is a prescribed person, where the income isn't 'excepted trust income'. • The effect of subsection 102AC(1) is that a person under 18 (on the last day of the income year) will be a prescribed person where they aren't an excepted person. • Subsection 102AC(2) lists several ways a minor can be an 'excepted person'. 3. One way to be an 'excepted person' is where the person is a disabled child for social security purposes. A person will be an excepted person where two requirements in paragraph 102AC(2)(d) are met. First, subparagraph (i) requires that the Commissioner must receive a certificate issued by a legally qualified medical practitioner. That certificate must certify that the minor is either: • a disabled child (or adult) within the meaning of Part 2.19 of the
Social Security Act 1991, or • a person with a continuing inability to work within the meaning of Part 2.3 of that Act, or • permanently blind. Second, the effect of subparagraph (ii) is that the Commissioner must be satisfied that the minor was disabled, unable to work, or permanently blind, in the sense certified under subparagraph (i) at the end of the relevant income year. 4. Person A will be a prescribed person unless he or she is an excepted person. He or she was born in XXXX, so he or she is (and will be) under 18 throughout the relevant income years. 5. However, Person A is an excepted person for the relevant income years because he or she meets both subparagraphs 102AC(2)(d)(i) and (ii). • Subparagraph 102AC(2)(d)(i) is met. The applicant supplied the Commissioner with a certificate issued by Medical Professional C. Medical Professional C's registration with the Medical Board of Australia show he or she is legally qualified to practice in Australia as a medical practitioner. The certificate was issued in XXXX and confirmed Person A was a disabled child under the Social Security Act 1991 .
• Subparagraph 102AC(2)(d)(ii) is also met. On these facts, the Commissioner is satisfied that Person A was and will continue to be a disabled child in that sense on the last day of all relevant income years. There seems no reasonable prospect that Person A will stop suffering from his or her condition in the ruling period. > [1] Australian Government, Department of Health and Aged Care (2023), 'Medical doctors and specialists in Australia', accessed at https://www.health.gov.au on 18 April 2023. [2] Australian Health Practitioner Regulation Agency (2023), 'Registers of Practitioners' accessed at https://www.ahpra.gov.au on 18 April 2023. [3] Very broadly, section 98 assesses trustees on a share of the net income of the trust estate in some circumstances, including where a beneficiary, who is under a legal disability, is presently entitled to that share.