Private ruling: interest income
Published: April 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Is all the interest income earned on funds invested in an account held in your name only included in your assessable income? | A1: Yes.

Relevant facts and circumstances: Your spouse sold an investment property. The proceeds from the sale of the property were deposited into a joint bank account held by you and your spouse. A short time later the funds were transferred into an account held in your name only to obtain a higher rate of return on the invested funds. The funds were later transferred out of the account and the interest earned remained in the account.


Reasons for decision: Summary: Your assessable income includes income according to ordinary concepts, which is called ordinary income (section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)). Interest income is ordinary income and is assessable to the persons who are beneficially entitled to the income. That entitlement depends on the beneficial ownership of the money that has been invested. The general presumption is that the holder of an account has beneficial ownership of the funds in that account. This presumption is rebuttable by evidence to the contrary. In your case, the funds were intentionally transferred to an account held in your name only. While the funds were invested in that account so a higher rate of return could be obtained, it would have been relatively simple to open a similar account in joint names and achieve the same rate of return. You are considered to be the beneficial owner of the invested funds, and as such, all of the interest income derived from those funds is included in your assessable income under section 6-5 of the ITAA 1997.

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