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

Ruling: Q1: Are you assessable on 50% of the interest income earned on the bank account held in your name? | A1: Yes.

Relevant facts and circumstances: You sold an asset owned jointly with your spouse. The proceeds from the sale were deposited into a joint bank account. You then mistakenly credited the joint funds into an individual account type believing that you were able to divide the interest income between you and your spouse equally. You do not earn any wages. You draw on funds from the account to pay for the living expenses of yourself and your spouse.

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 assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Interest earned on bank accounts and term deposits is considered ordinary income under section 6-5 of the ITAA 1997. Taxation Determination TD 92/106 provides that interest income on a joint bank account should be returned by taxpayers who are beneficially entitled to the income. That entitlement depends on the beneficial ownership of the moneys held in the account. The general presumption is that holders of accounts in joint names have joint beneficial ownership of the moneys in equal shares, unless evidence is provided to the contrary. Although TD 92/106 refers to joint bank accounts, the same principle is applied for sole bank accounts. In the case of a sole bank account the beneficial ownership of the funds is generally the account holder. In determining the beneficial ownership, consideration is given to who contributed to the funds of the account and in what proportion and also who has withdrawn funds from the account. In your case, the funds deposited into the bank account held only in your name were from the sale of an asset held jointly with your spouse. You have beneficial ownership of 50% of the funds in the account. Therefore, 50% of the interest earned from the bank account is attributable to you and should be included as assessable income in your income tax return.

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