In Australia, minors – individuals under the age of 18 – are subject to taxation like adults, but with some distinct rules and thresholds that can impact how their income is taxed. Understanding how tax applies to minors in Australia is essential for parents, guardians, and young Australians themselves, especially if a minor has a part-time job, runs a small business, or receives investment income.

Who Is Considered a Minor for Tax Purposes?

In Australia, a minor is generally someone under the age of 18. For tax purposes, a minor can be an Australian citizen, a resident, or a temporary resident, and their income is taxed based on their residency status and the nature of their earnings.

Special Tax Rates for Minors

Tax for Residents Under 18

• Income $0 – $416: No tax.
• Income $417 – $1,307: No tax on the first $416, but 66% tax on the excess over $416.
• Income Over $1,307: Taxed at 45% on income exceeding $1,307.

Tax for Non-Residents Under 18

• Income $0 – $416: Taxed at 30% on the entire amount.
• Income $417 – $713: Taxed at $124.80 plus 66% on the excess over $416.
• Income Over $713: Taxed at 45% on the entire amount.

Exceptions

Excepted Person

A minor may be considered an excepted person and subject to the same tax rates as an adult if they meet certain criteria. These criteria include:

1. Full-Time Worker: A minor is an excepted person if, by June 30 of the relevant income year, they have worked full-time for at least three months, intend to work full-time for most of the next year, and are not planning to study full-time.
2. Person with a Disability: A minor with a disability may qualify as an excepted person if they:
   • Are the main beneficiary of a special disability trust,
   • Receive a disability support pension or have a carer allowance,
   • Are permanently blind,
   • Are disabled and unable to work full-time due to a permanent disability.
3. Person with a Double Orphan Pension: A minor receiving a double orphan pension and little or no financial support from relatives is considered an excepted person.

If a minor is an excepted person, all their income is taxed at adult tax rates. If not, they must determine if they receive any “excepted income,” which would also be taxed at the adult rate.

Excepted Income

As a minor in Australia, you may have excepted income, which is taxed at the same rates as an adult’s income. Excepted income includes:

• Employment income
• Taxable pensions or payments from Centrelink
• Compensation
• Income from a deceased person’s estate, including from a testamentary trust
• Income from property transferred due to death or family breakdown, or damages for personal injury
• Income from your own business
• Income from a partnership where you are an active partner
• Net capital gains from disposing of property or investments listed above
• Income from the investment of any of the above amounts

If you receive excepted income, your “excepted net income” is taxed like an adult’s, which is calculated by subtracting any deductions from the excepted income. If you don’t have excepted income, your other income is taxed at higher rates, with no reduction for the low-income tax offset.

Conclusion

Navigating the tax system as a minor in Australia can be complex, but understanding the applicable tax rates and exceptions is essential for managing income responsibly. Minors are generally subject to tax at adult rates on most forms of income, with special rules in place to prevent income splitting and ensure fairness. However, certain minors may qualify as “excepted persons,” allowing their income to be taxed at standard adult rates, whether due to full-time employment, disability, or other qualifying circumstances. Additionally, minors who receive excepted income, such as employment or pension payments, benefit from the same tax rates as adults. By understanding these rules, parents and guardians can help minors plan for tax obligations, ensuring compliance and reducing the risk of unexpected tax liabilities.

Disclaimer: The information provided in this article is intended for general informational purposes only and should not be relied upon as legal, financial or any other type of professional advice. The content presented here is not tailored to individual circumstances, and therefore, readers should not act upon this information without seeking appropriate professional guidance specific to their unique situation. The author and publisher of this article disclaim any liability or responsibility for any loss or damage that may arise from reliance on information contained in this article.