Private ruling: Interest income
Published: October 2014
Ruling period: Year ended 30 June 2010 to 2018
Date scheme commenced: 1 July 2009

Ruling: Q1: Are you assessable on interest income on accounts in both your and your parent's name? | A1: No.


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

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 specifies that residents of Australia are assessable on income derived from all sources in and out of Australia. Interest income is regarded as ordinary income and therefore assessable. Taxation Determination TD 92/106 which deals with who should be assessed to interest earned on a joint bank account, states that interest income on a joint bank account is assessed to the persons who are beneficially entitled to the income ( MacFarlane v FC of T 86 ATC 4477; (1986) 17 ATR 808). The entitlement depends on the beneficial ownership of the money in the account. The general presumption is that holders of accounts in joint names have joint beneficial ownership of the moneys in equal shares. This presumption is rebuttable by evidence to the contrary (see Case Z7 92 ATC 131; AAT Case 7675 (1991) 22 ATR 3591). Evidence relevant in determining an individual's beneficial entitlement includes information as to who contributed to the account, in what proportions the contributions were made, who drew on the account, who used the money and who the interest is distributed to. In your case, all the funds in the account are from your parent's pension and all drawings from the account are made for your parent's use. It is your parent who is beneficially entitled to the funds in the account. Therefore, you are not assessable on the income derived from the account.

Relevant facts: You hold an account with your elderly parent. | The funds in the account are your parent's and any drawings on the account are for the benefit of your parent.