ATO Interpretative Decision
ATO ID 2001/612
Income Tax
Derivation of interest income from term deposit with a bankFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
When is interest income on a short term investment derived under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Interest income on a short term investment is derived under section 6-5 of the ITAA 1997 on the date when the interest is received or credited to the taxpayer's account.
Facts
The taxpayer invested funds in term deposits with a bank at a fixed interest rate and for a specified period not exceeding 12 months.
At maturity, interest income was credited to the principal sum of the term deposit.
Reasons for Decision
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:
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- received by the taxpayer; or
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- dealt with on the taxpayer's behalf or as the taxpayer directs.
The taxpayer is credited with interest on the maturity of the term deposit. Accordingly, the interest is derived in the year of income that it is credited to the principal sum of the investment.
Date of decision: 29 June 2001Year of income: Year ended 30 June 2000 Year ended 30 June 2001 Year ending 30 June 2002
Legislative References:
Income Tax Assessment Act 1997
subsection 6-5(2)
subsection 6-5(4)
Keywords
Interest income
Derived
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 29 June 2001 | Original statement |
| 6 June 2008 | Archived |