Private ruling: interest income
Published: March 2012
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 1 July 2010

Ruling: Q1: Is the interest income on money's belonging to your children form part of your assessable income? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1936 section 6-5.

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Interest income is regarded as ordinary income. Taxation Ruling IT 2486 provides guidelines on who is assessable on income derived from children's bank accounts. The ruling states that children's savings accounts may be held with a bank, credit union, building society or other financial institution. The accounts are usually opened and operated by parents. Many accounts are opened in the names of the children while others are called trust accounts. 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 they provided the money and may spend it as they like, then the parent should include the interest in his or her return. On the other hand, if the account is made up of money the child has received as birthday or Christmas presents, pocket-money or money from newspaper rounds, then the money in the account should be regarded as that of the child. In your case, you have deposited money from your late relation's estate into bank accounts for your children. After reviewing your specific circumstances, it is considered that the funds in the bank accounts belong to your children and not yourself. The facts which support this conclusion are as follows: 1. the money in the funds were not provided by you, but bequeathed to your children, 2. you do not withdraw any money from the account for your own use, 3. the money is being kept for your children's use only, and 4. the reason your name is on the account is because your children are under 18 years of age. Applying the principles of IT 2486, as you are not the beneficial owner of the funds, the income from these bank accounts that hold your children's money is not assessable income to you.

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: When your relation died, some money was left for your children under the will. | You set up bank accounts to deposit your children's proceeds from the deceased estate. | No other money is in the accounts. | The money is for the children's use only. You do not use the money for your own needs.