Private ruling: interest income ownership
Published: April 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to declare income from 50% of the interest earned on your jointly held online saver accounts? | A1: Yes.

Relevant facts and circumstances: You and your spouse both set up a bank account with each of you as signatories. All of the original funding came from the sale of a jointly owned asset. Linked to this account are several subsidiary online investment accounts which earn interest. These were set up by one partner as the other was out of Australia and unable to attend as a signatory. Amounts cannot be deposited to or withdrawn from any of these accounts directly, but must be transferred through the main account where both partners are joint account holders and signatories. There are no deposits other than interest earned going into either the main account or any of the subsidiary accounts. The partner who was overseas when the subsidiary accounts were set up does not intend to return to Australia, and is a non-resident of Australia for taxation purposes.

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

Reasons for decision: Summary: Interest income is assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 . Taxation Determination TD 92/106 states that interest income on a joint bank account should be returned by taxpayers in accordance with their beneficial interests, otherwise the interest will be assessed to the account holders in equal shares. The general presumption is that holders of accounts in joint names have joint beneficial ownership of the monies in equal shares, unless evidence is provided to the contrary. The sort of relevant documentary evidence includes: · information showing who contributed the funds to the account, · in what proportions the contributions were made, · who drew on the account, and · who used the money and the accrued interest as their own property. In your case, one partner has set up subsidiary accounts held in their name only. You and your partner contributed jointly to the original account which is still held in both names. All deposits and income from the subsidiary accounts must go through the joint bank account, and cannot be accessed directly by either partner from the subsidiary accounts. We consider that the general presumption of joint beneficial ownership applies in your case. As the funds were contributed to the original account from the sale of a joint asset and no other income is received by this or the subsidiary accounts, there is no evidence to rebut this presumption. For these reasons, the interest income should be declared according to your beneficial interest, that is, your 50% share each.

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