Private ruling: Interest on joint account - Assessability
Published: September 2011
Ruling period: 1 July 2010 to 30 June 2011

Ruling: Question and Answer | Are you assessable for interest accrued on the joint account with your spouse? | No. | Are you assessable for interest accrued on a term deposit? | No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Joint Bank Account You have a joint bank account with your spouse. The money in the bank account belongs to your spouse. You spouse uses the account to pay bills. Your spouse is the only person who makes deposits and withdrawals from the account. The interest accrued on the account is utilised by her. Your spouse's income is paid into the account. Your spouse did not work between xx xx xx and xx xx xx. On xx xx xx an amount was withdrawn from the account to be used by your spouse's parents. On xx xx xx an amount was reimbursed by your spouse's parents. On xx xx xx and amount was reimbursed by your spouse's parents. On xx xx xx an amount was withdrawn by your spouse to purchase a car. Term Deposit You have a term deposit in your name. The term deposit is a bond through the immigration department for sponsoring your spouse's parents. The money is their money. The interest accrued is deposited into your spouse's personal bank account. Reason for Decision Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states that, if you are an Australian resident, your assessable income includes ordinary income derived directly or indirectly from all sources whether in or out of Australia during the income year. Bank interest is income according to ordinary concepts and accordingly, is classified as assessable income under section 6-5 of the ITAA 1997. In order to determine where this income should be declared, it is necessary to establish who has earned the income. Taxation Determination TD 92/106 explains who should be assessed on interest earned from a joint bank account. Although TD 92/106 relates to joint accounts, the same principle applies to interest earned by individual account holders. In TD 92/106 it is stated that interest should be assessed to the person or persons who have beneficial entitlement to the funds. Such entitlement must be supported by evidence. In the absence of such evidence, interest is assessed to the holder/s of the account. Joint Bank Account You have provided documentary evidence, bank statement, which has established that you do not have a beneficial interest to the funds held in the joint account. The beneficial interest of this account belongs to your spouse who contributed all the funds in the account from salary and deposits from her personal account. Your spouse was the only one who withdrew from the account and used the money and its accrued interest as her own property for private purposes. Consequently, the interest that accrued in this joint account does not form part of your assessable income for the financial year ended 30 June 2011. Term Deposit You will need to declare any interest earned from a term deposit during the relevant financial year that it is paid or credited to you. This applies even if you cannot access the interest until the end of the term, that is, the date of maturity The term deposit money was contributed totally by your spouse's parents, so they could immigrate to Australia. The account is held in your name but the interest is deposited into your spouse's personal account. These circumstances suggest that you are not beneficially entitled to the interest in the account. Consequently, the interest that accrued in term deposit does not form part of your assessable income for the financial year ended 30 June 2011.


Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states that, if you are an Australian resident, your assessable income includes ordinary income derived directly or indirectly from all sources whether in or out of Australia during the income year. Bank interest is income according to ordinary concepts and accordingly, is classified as assessable income under section 6-5 of the ITAA 1997. In order to determine where this income should be declared, it is necessary to establish who has earned the income. Taxation Determination TD 92/106 explains who should be assessed on interest earned from a joint bank account. Although TD 92/106 relates to joint accounts, the same principle applies to interest earned by individual account holders. In TD 92/106 it is stated that interest should be assessed to the person or persons who have beneficial entitlement to the funds. Such entitlement must be supported by evidence. In the absence of such evidence, interest is assessed to the holder/s of the account. | Detailed Reasoning - Joint Bank Account: You have provided documentary evidence, bank statement, which has established that you do not have a beneficial interest to the funds held in the joint account. The beneficial interest of this account belongs to your spouse who contributed all the funds in the account from salary and deposits from her personal account. Your spouse was the only one who withdrew from the account and used the money and its accrued interest as her own property for private purposes. Consequently, the interest that accrued in this joint account does not form part of your assessable income for the financial year ended 30 June 2011. | Detailed Reasoning - Term Deposit: You will need to declare any interest earned from a term deposit during the relevant financial year that it is paid or credited to you. This applies even if you cannot access the interest until the end of the term, that is, the date of maturity The term deposit money was contributed totally by your spouse's parents, so they could immigrate to Australia. The account is held in your name but the interest is deposited into your spouse's personal account. These circumstances suggest that you are not beneficially entitled to the interest in the account. Consequently, the interest that accrued in term deposit does not form part of your assessable income for the financial year ended 30 June 2011.

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.