Private ruling: Assessable Income
Date of advice: 17 September 2015
Published: September 2015
Ruling period: 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 2012

Ruling: Q1: Is interest derived and reportable at the time your term deposit matures? | A1: Yes.

Relevant facts and circumstances: You invested in a term deposit payable on maturity in 20XX. The account is under your name solely. You receive yearly statements which show $0 interest paid to you. Your bank has told you that you have not been paid any interest in the year and will not until the investment matures.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5, | Income Tax Assessment Act 1997 Subsection 6-5(1), | Income Tax Assessment Act 1997 Subsection 6-5(2) and | Income Tax Assessment Act 1997 Subsection 6-5(4).

Reasons for decision: Summary: Subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that your assessable income includes income according to ordinary concepts, which is also known as ordinary income. Interest received on a term deposit is income according to ordinary concepts. Interest is assessable income under section 6-5 of the ITAA 1997 in the year in which it is received ((1958) 9 TBRD Case J20 ; 7 CTBR (NS) Case 130 ; and (1958) 9 TBRD Case J60 ; 8 CTBR (NS) Case 50 ). Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Subsection 6-5(4) of the ITAA 1997 states that a taxpayer derives an amount of ordinary income when the amount is: • received by the taxpayer; or • dealt with on the taxpayer's behalf or as the taxpayer directs. | Detailed Reasoning - Application to your circumstances: You will be credited with interest on the maturity of the term deposit; you have not been accruing interest yearly. Accordingly, the interest is derived in the year of income that it is credited to the principal sum of the investment. Your interest will be reportable as assessable income in the year received.