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Under 18 Adjustment

The ATO taxes the income of minors - those under 18 - at higher rates than it does the income of adults. However certain minors and certain income is excepted from the higher rates. If you were under 18 on 30 June, the last day of the financial year, you must complete the Under 18 Adjustment section of your return to make sure you are not unnecessarily taxed at a higher rate. Note: minors who are Australian residents do not need to file a tax return if their income is less than $416.

Excepted persons pay normal rates on all of their income. Exempted persons include minors who

  • worked full-time for at least three months during the financial year and plan to work full-time for most of the 2012-2013 financial year and do not intend to study full-time in 2012-2013
  • are entitled to a disability support pension or rehabilitation allowance, or someone else is entitled to a carer pension to care for them
  • are permanently blind
  • are disabled and likely to suffer from a disability permanently or for an extended period
  • are entitled to a double orphan pension and receive little or no financial support from relatives
  • are unable to work full-time due to permanent mental or physical disability and receive little or no financial support from relatives

Even if a minor does not qualify as an excepted person, some of their income may qualify as excepted income, and thus be subject to the normal rates. Excepted income includes:

  • employment income
  • taxable pensions or payments from Centrelink or the Department of Veterans’ Affairs
  • compensation, superannuation, or pension fund benefits
  • income from a deceased person’s estate
  • income from property transferred as a result of a person’s death or family breakdown, or income from damages for an injury they suffered
  • income from their own business
  • income from a partnership in which they were an active partner
  • net capital gains from the disposal of any property or investments listed above
  • income from the investment of any of the amounts listed above

Excepted net income (total excepted income minus deductions related to that income) is taxable at normal rates and can be reduced by the low income tax offset.

The non-excepted income of a non-excepted person is taxed at a higher rate and will not be reduced by the low income tax offset.