Taxability of the income of minor children

The Law

Section 68. Income and capital gain of married persons and minor children.—(1) Any—

(a) income received by or accrued to or in favour of any person married in or out of community of property which in terms of section 7 (2) is deemed to be income received by or accrued to such person’s spouse; or
(b) capital gain which is in terms of paragraph 68 of the Eighth Schedule taken into account in the determination of the aggregate capital gain or aggregate capital loss of such person’s spouse,
shall be included by such spouse in returns of income required to be rendered by that spouse under this Act.

(2) In the event of the death of any person during any year in respect of which such income is chargeable or in which such capital gain is taken into account, the income or capital gain of such person’s spouse for the period elapsing between the date of such death and the last day of the year of assessment shall be returned as the separate income of such spouse.

(3) (a) Every parent shall be required to include in his return—

(i) any income received by or accrued to or in favour of any of that parent’s minor children either directly or indirectly from that parent; or
(ii) any capital gain or capital loss in respect of any transaction entered into directly or indirectly by that parent, which is taken into account in the determination of the aggregate capital gain or aggregate capital loss of any of that parent’s minor children, together with such particulars as may be required by the Commissioner.

(b) Every parent shall be required to include in that parent’s return any income deemed to be that parent’s income in terms of subsection (3) or (4) of section 7 or any capital gain deemed to be that parent’s capital gain in terms of paragraph 69 of the Eighth Schedule.

Income of Minor children
A taxpayer is liable for the payment of tax on any income which has been received by or accrued to or in favour of any minor children if such income arises from a donation, settlement, or other disposition by –
(i) the taxpayer; or
(ii) any other person, if the taxpayer made a donation, settlement or gave some consideration directly or indirectly in favour of the other person or his family.

A minor child will, however, be liable for tax on income which is received or accrues to him/her independently of him/herself; in his own right, for example, bona fide salary and investment income derived from his/her own funds i.e. from money inherited by him/her or received as a gift from any person other than the person mentioned in (i) and (ii) above or
from any other source. Should a minor child’s taxable income be sufficient to render him/her liable for tax, the taxpayer, as the legal guardian, must register him/her for income tax purposes and obtain and submit a return on his/her behalf.

All investment income received by or accrued to a taxpayer or his/her minor children must be declared (including investment income which has not been paid but has been utilised, accumulated or re-invested for the taxpayer or his/her minor children’s benefit). Where interest is claimed as a deduction against investment income received, full particulars (i.e.
amounts invested/borrowed, interest rates, date of each loan and investment) must retained for a period of five years after submission of the return.

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