Disclaimer This edited version will be removed from the Database after 30 September 2025. If you believe the issues detailed in this edited version warrant retention in an alternative form, email publicguidance@ato.gov.au This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011562480087
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Bank interest - child's bank account
Question 1
Is interest earned on an account held in trust for your child included in your assessable income?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts and circumstances
A passbook account was opened for your child when they were born.
As your child is disabled the account was held in your name in trust for them.
The money in the account has always belonged to your child, their disability pension is deposited into the account and withdrawals are for their personal use.
Recently the passbook account has been closed and funds transferred into a term deposit and a deeming account solely in your child's name.
The accounts in your child's name have been opened up to simplify their future banking and finance needs.
Your child is X years old.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
Reasons for decision
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 Ruling IT 2486 contains the Commissioner's views on the tax treatment of bank accounts opened in the name of a child and conducted by a parent, as trustee on behalf of the child and it considers the question of who should pay tax on the interest earned in a child's bank account.
IT 2486 states that the essential question to be asked is "Whose money is it?" The answer inevitably depends upon the facts of each case. If it belongs to the child and the child's total income from all sources is less than $416, then no tax is payable and no tax returns will be required.
In your case you have held an account in trust for your child as they are disabled. The account was opened when your child was born. The money in the account belongs to your child and they have their disability pension deposited into the account every fortnight. Withdrawals from the account are for your child's personal needs.
In accordance with IT 2486 it is accepted that the money in the account belongs to your child and accordingly any interest income earned from the account will need to be declared by your child in their own individual tax return.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).