Private ruling: Declaring interest income
Published: October 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Is the interest income from your children's bank accounts assessable to you? | A1: No

Relevant facts and circumstances: You have children and you have a bank account for each where they have saved cash received as birthday and Christmas gifts. The accounts are in your name in trust for each child and you are a signatory with access, also each child has an access card for their account. For the last few years you have contributed a small amount each month into each account and this amount totals to about X% of the account balances. The funds in the accounts are not accessed by you and rarely accessed by the children. The children each see their account as their long term savings.

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 provides that the assessable income includes income according to ordinary concepts that was derived by you. Interest received is generally considered to be ordinary income. Taxation Ruling IT 2486 considers the question, 'who should pay tax on the interest earned in children's bank account?' IT 2486 states that the essential question that must be asked is whose money is it? If the account is made up of money the child has received as birthday or Christmas presents or pocket money, then the money in the account should be regarded as that of the child. In your case the money in the accounts is mainly from gifts received by your children over the years. It is accepted that the funds in the accounts belong to your children. Consequently, the income from the accounts is not included in your assessable income.

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