Private ruling: Beneficial ownership of interest income
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
Date scheme commenced: 1 July 2010

Ruling: Q1: Is all of the income from the term deposit accounts which you and others hold in joint names solely assessable to you? | A1: Yes.

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. You are an aged person, and recently set up bank accounts to deal with proceeds from a number of term deposits which you inherited. You paid large legal costs to have the inherited funds transferred to your name. You have set up a number of term deposits in the joint names of yourself and each of your relatives. This is so that should you pass away, each of the relatives will then have access to the joint account funds without expensive transfer fees. You placed a number of conditions on these term deposit accounts. Your relative's names are on the account solely to enable them to access funds from the accounts once you pass away. You are a self funded retiree and rely solely on the income from the accounts. All the monies held in the accounts and interest earned are solely for the use of you while alive. You setup and operate the accounts by yourself. Your relatives have not received any monies from the account, and interest earned is all credited to your savings account. You use the interest earned to maintain your present lifestyle, and you are mindful that you may need aged care in the future. Your relatives have not contributed to the accounts. Your relatives have had no benefit from interest accrued in any of the accounts held in both names.

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 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 deals with the issue of the assessability of interest earned on a joint bank account. It states that interest income on a joint bank account should be assessed to the persons who are beneficially entitled to the income ( MacFarlane v. FC of T 13 FCR 356; 86 ATC 4477; (1986) 17 ATR 808). That entitlement depends on the beneficial ownership of the money in the account. Evidence relevant in determining the beneficial entitlement includes information as to who contributed to the account, in what proportions the contributions were made, the nature of the contributions, who drew on the account, and who used the money and the accrued interest as their own property. In your case only you have contributed monies to the accounts. The monies in the accounts are held specifically for your welfare and care, and your relative's names are on the accounts only to enable them to access the funds on inheritance. Your relatives have not received any money from the accounts. The conditions placed on the term deposits by you suggest that your relatives have no beneficial entitlement to the money in the accounts or to any interest income which is derived. Accordingly you are solely assessable on the interest income derived from these accounts.

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.