Private ruling: Foreign interest income
Date of advice: 11 March 2020
Published: April 2020
Ruling period: 01 July 2018 to 30 June 2019 | 01 July 2019 to 30 June 2020
Date scheme commenced: 01 July 2018

Ruling: Q1: Do you have a beneficial ownership of the foreign bank account you jointly have with your parent and any interest received assessable income under section 6-5 of Income Tax Assessment Act 1997 ? | A1: No, the interest from the joint foreign bank account received by your parent does not form part of your assessable income.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You advised that you have joint bank account with your parent with the Bank. You do not use this bank account and is solely for your parent who has the beneficial ownership of the money. You are a joint account holder with your parent since your parent passed away. You have committed to be a joint account holder to help your parent should a need arises. You have sent gifts to this account to be used by your parent and parent for their expenses over the years. You have not drawn any money for yourself from these accounts. While the bank interest is credited to the joint account, you advised that you have never used any interest received from the account. The interest is used solely by your parent. You have furnished a declaration from your parent witnessed by a solicitor to advice that the bank interest that is credited to the joint account is for the sole use of your parent.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. The foreign bank interest you receive in the joint accounts with your parent are not assessable under section 6-5 of the ITAA 1997 as you do not have any beneficial ownership of the money in the account | Detailed Reasoning - Detailed reasoning: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) defines income according to ordinary concepts ( ordinary income ) as: (1) Your assessable income includes income according to ordinary concepts, which is called ordinary income. (2) If you are an Australian resident, your assessable income includes the *ordinary income you *derived directly or indirectly from all sources, whether in or out of Australia, during the income year. (3) If you are a foreign resident, your assessable income includes: (a) the *ordinary income you *derived directly or indirectly from all *Australian sources during the income year; and (b) other *ordinary income that a provision includes in your assessable income for the income year on some basis other than having an *Australian source. (4) In working out whether you have derived an amount of *ordinary income, and (if so) when you derived it, you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct. If you're an Australian resident and you receive interest, you must declare it as income. Interest income includes: Unless there is evidence to the contrary, the ATO assumes that joint account holders own the money in equal shares and benefit equally. However, this can be refuted if there is clear evidence to show that one of the joint account holders manages the money in the account for the benefit of the other person. Taxation Determination TD 2017/11 outlines that for income tax purposes, interest income on a bank account is assessable to the person or persons who "beneficially" own the money in the account. Therefore, for income tax purposes, interest income on a bank account is assessable to the person or persons who beneficially own the money in the account in proportion to their beneficial ownership. In your circumstances, you have advised that your parent owns all of the money in the account and your parent treats all of the interest as her money. She has beneficial ownership of the money in the account and is therefore assessed on all of the interest income. While you are a joint account holder and a joint signatory to the account you will only operate the account if your parent is unable to do so due to ill health. Presently, your parent is able to operate the account on her own. | Detailed Reasoning - Application to your circumstances: Having considered your circumstances and as all the funds in the account belong to your parent, you are not entitled to personally receive any money from the account and do not have any beneficial ownership of the money in the accounts, the foreign interest income received on these accounts are not assessable to you under section 6-5 of the ITAA 1997. You should apply for a new ruling if there are any future changes to the operation and beneficial ownership of the account as you cannot rely on this ruling.

Reasons for decision: These reasons for decision accompany the notice of private ruling. | interest earned from financial institution accounts and term deposits | interest earned from any other source including penalty interest received on an investment | interest earned from children's savings accounts if you opened or operated an account for a child and the funds in the account belonged to you, or you spent or used the funds in the account | interest we paid or credited to you | life insurance bonuses (you may be entitled to a tax offset equal to 30% of any bonus amounts included in your income) | interest from foreign sources (you may be entitled to a tax offset for any tax paid on this income).