Do minors who earn an income have to pay taxes?

The majority of children don’t work - at least, not in developed countries. However, there are a select few minors who manage to earn an income. This may be through acting in local television shows, or by earning ad revenue on a YouTube channel, for example.

In either case, what does this mean when it comes to taxes? We have a look at what the law says about minors earning an income, and we consider the tax implications of this.

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Are children allowed to earn an income?  

According to the Basic Conditions of Employment Act in South Africa, you are not allowed to employ someone who is under the age of 15. This is because children are considered vulnerable since they are dependent on the protection of others. 

For children who are between the ages of 15 and 18, you need to ensure that the job does not interfere with their well-being, education, or health.

However, this does not mean that minors are disallowed to receive or earn an income.

There are three different scenarios under which a child who’s under the age of 15 may receive money:  

1. As an inheritance or a gift from an adult, such as their grandparents.
2. As an employee, for example an actor, under the watch of their legal guardian.
3. As an entrepreneur who has started their own business, such as a YouTube channel.

READ MORE: Even unborn children can get life cover

So then, how do children pay taxes?

According to Sheldon Friedericksen, CFO at Fedgroup, any person, regardless of age, needs to register for tax if their income exceeds the tax-free threshold. He explains that this threshold is set at R87,300 for those under the age of 65.

“A parent or legal guardian of the minor child may be required to include any income of the minor in their own tax return. This applies if the source of income is either directly or indirectly received from the parent or legal guardian, such as pocket money” says Friedericksen.

However, he explains that if the minor receives income from their own business or investment, they would personally be liable to pay tax on their income.

“As a result, the parent or guardian would be responsible for registering the minor for tax – if the income exceeds the tax-free threshold – and then preparing and submitting the tax return on their behalf,” says Friedericksen.

He recommends trying tax-incentivised investment products, such as tax-free investments and life wrapped investments, which offer the added benefits of the administration of tax on behalf of the investor.

Before you consider investments, make sure your debt is taken care of – consolidate your debt.