Private ruling: Income - interest - ownership
Date of advice: 6 January 2016
Published: March 2016
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does interest income earned from a bank account held in trust for your parent, form part of your assessable income? | A1: No

Relevant facts and circumstances: You opened a bank account in which earned interest. This account was held on behalf of your parent. The funds were deposited from your parent's account so that you could purchase everyday items and pay bills on their behalf. You have copies on bank statements showing the everyday use of this account was solely used for your parent's expenses.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 6-5(1)

Reasons for decision: Summary: Interest income is assessable under subsection 6-5(1) of the Income Tax Assessment Act 1997 as ordinary income. The person who derives the income is the person who is assessable for any tax on that income. In certain circumstances, interest income that is earned by a taxpayer through money held in an account in their name may not be assessable for the tax on that income. This is the case in situations where the money is held in trust. Taxation Ruling IT 2486 discusses the issue of money held in trust for another person. The circumstances in each case must be considered when determining whose money it is. 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, you held a bank account as trustee for your mother. Funds were deposited from your parent's bank account so that you could purchase everyday items and pay bills on your parent's behalf. This account was used solely for your parent's expenses. In accordance with IT 2486 it is accepted that the monies in the account do not belong to you. Therefore, the interest earned on the trust account is not assessable to you.