Private ruling: Beneficial ownership
Date of advice: 3 August 2015
Published: August 2015
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you required to include the dividends in your assessable income? | A1: No.

Relevant facts and circumstances: You purchased shares as guardian for your child when they were a minor. Your child has always received the franked dividend into their own bank account. You child has declared the franked dividends as income on their income tax return since they began working.

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 (ITAA 1997) provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Beneficial ownership A beneficial owner is defined in Taxation Ruling IT 2486 and Taxation Determination TD 92/106. A beneficial owner is the person or entity who is beneficially entitled to the income and proceeds from the asset. A legal owner is the individual who has their name on the legal documents associated with the capital gains tax (CGT) asset, an example would be the title deed for a property. An individual can be a legal owner but have no beneficial ownership in an asset. It is the beneficial owner of a CGT asset that is entitled to income earned from the asset and liable for capital gains tax upon sale of the asset. In some cases, an entity may hold a legal ownership interest in property for another individual in trust. Application to your circumstances In this case, you purchased the shares on behalf of your child while they were a minor. The dividends that relate to the shares have always been deposited into your child's bank account. They have declared the income in their income tax return since they began working. We accept that you are holding the shares on trust for your child and that they hold the beneficial ownership. Therefore, you are not required to declare the dividends from the shares as income in your income tax return.