ATO Interpretative Decision

ATO ID 2002/596 (Withdrawn)

Income Tax

Assessability of interest paid by a relative of the taxpayer
FOI status: may be released

This ATO ID has been withdrawn as it is a simple restatement of the law and does not contain an interpretative decision.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Is the interest the taxpayer receives from a relative assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. The interest the taxpayer receives from a relative is assessable under section 6-5 of the ITAA 1997 as interest is income according to ordinary concepts.

Facts

The taxpayer lent money to their relative.

Formal documentation was drawn up and the loan was on a normal commercial basis.

Interest was paid to the taxpayer by their relative under the loan.

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.

Ordinary income has generally been held to include 3 categories, namely, income from rendering personal service, income from property and income from carrying on a business.

In many instances there can be no dispute as to the character of a receipt, for example salary, wages and interest payments are clearly ordinary income. The fact that the interest is paid by a relative of the taxpayer does not change the character of the receipt, it remains ordinary income.

The interest payments are therefore included in the taxpayer's assessable income under section 6-5 of the ITAA 1997.

Date of decision: 4 April 2002

Year of income: Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2001 Year ending 30 June 2002 Year ending 30 June 2003 Year ending 30 June 2004 Year ending 30 June 2005

Legislative References:
Income Tax Assessment Act 1997
section 6-5
subsection 6-5(2)

Keywords
Interest income

Business Line: Small Business/Individual Taxpayers

Date of publication: 31 May 2002

ISSN: 1445-2782

history

	Date:	Version:
	4 April 2002	Original statement
You are here	8 October 2010	Archived

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