Private ruling: Income - funds held in trust
Published: July 2013
Ruling period: Year ended 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2012

Ruling: Q1: Does the interest income earned from bank accounts held in trust for you, form part of your assessable income? | A1: Yes.

Relevant facts and circumstances: Several accounts have been opened under a Power Of Attorney (POA) and held in trust for you. The initial amounts deposited into theses accounts was transferred from other accounts held in your name and from the sale of property. The Interest earned on these accounts is used for your day-to-day living expenses.

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 of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Ordinary income has generally been held to include interest income. Taxation Determination TD 92/106 explains who should be assessed on interest earned in a joint bank account. Although TD 92/106 relates to joint accounts, the same principal applies to interest earned on accounts held in trust. TD 92/106 states that interest should be assessed to those who have beneficial entitlement to the funds. Regardless of the name and type of the account, the essential question that must be asked is: 'whose money is it?'. The circumstances in each case must be considered when determining whose money it is. The types of evidence that may show that the ownership of the moneys in an account is someone other than the account holder/s are: · information showing who contributed funds to the account, · in what proportions the contributions were made, · who drew on the account, and · who used the money and accrued the interest as their own property. In your case, several accounts have been opened in trust for you under a POA. The initial deposits into these accounts were from the sale of your residential property and the balance of your retirement savings. Interest earned on these funds is used for your day-to-day living expenses. In accordance with TD 92/106 it is accepted that the monies in the account belong to you. Therefore, interest earned on these accounts is assessable to you and will need to be included as assessable income in your income tax returns.