Private ruling: Income-interest child account
Published: June 2012
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 2010

Ruling: Q1: Is the interest earned on the account held in trust for a family member included in your assessable income? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 6-5(2).

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, in or out of Australia, during the income year. Interest income is considered to be income according to ordinary concepts and is therefore assessable. Taxation Ruling IT 2486 examines the situation where a parent operates a bank account in trust for their children. Whilst we appreciate your family member is not a child, the principles examined in this ruling provide the appropriate guidance. The ruling essentially states that regardless of the name and type of the account, the essential question that must be asked is: 'Whose money is it?' If the money really belongs to the parent, in the sense that the parent provided the money and may spend it as he or she likes, then the parent should include the interest in his or her return. If the child earned the money from employment or presents/gifts etc, then the money in the account should be regarded as that of the child. In your situation, the family member is paid a pension. Living expenses are deducted from this pension and the residual is placed in the account you hold on the family member's behalf. You do not have beneficial ownership of the account. This is enforced under laws governing your actions as administrators of your family member's affairs. The monies in the account remain the family member's and they are able to access these funds under your guidance and authorisation. Consequently the interest earned on this account is not included in your assessable income. As the money belongs to the family member, the interest is included in their assessable income.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You and your spouse have been appointed administrators of a family member's affairs, as a result of their current incapacity. | You operate a bank account jointly with your spouse as trustee for this family member. | The family member is paid a disability pension. | You deduct various living expenses from the pension and the residual amount is deposited into this account. | The family member is able to access these funds under your guidance and authorisation. | You are required by law to complete annual returns detailing your administration and the monies spent on the family member's behalf. | You are accountable for your use of these funds to ensure they are only expended on the family member's behalf.