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Edited version of private ruling
Authorisation Number: 1011616013158
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Ruling
Subject: Bank interest
Are you assessable on 50% of the interest earned on accounts in your name where the funds belong to both you and your partner?
Yes.
This ruling applies for the following periods:
Year ended 30 June 2008
Year ended 30 June 2009
Year ended 30 June 2010
Year ended 30 June 2011
The scheme commences on:
1 July 2007
Relevant facts and circumstances
You and your partner opened special term deposit accounts with joint funds.
The accounts were opened in your name only as a matter of convenience as your partner was overseas at the time.
All funds used to open the special accounts were joint funds which came from a jointly held account (Account A).
The interest earned from the special term deposit accounts has been credited into Account A which is in joint name.
It has always been the intention of you and your partner that the money in the special accounts be jointly held. You both consider you have beneficial ownership of the funds.
You have instructed the bank, on maturity of the term deposit accounts, to deposit the capital in Account A and you and your partner will then reinvest the moneys in joint name.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2).
Reasons for Decision
Interest income is assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997).
Taxation Determination TD 92/106 provides that interest income on a joint bank account should be returned by taxpayers who are beneficially entitled to the income. That entitlement depends on the beneficial ownership of the moneys held in the account. The general presumption is that holders of accounts in joint names have joint beneficial ownership of the moneys in equal shares, unless evidence is provided to the contrary.
Although TD 92/106 refers to joint bank accounts, the same principle is applied for sole bank accounts. In the case of a sole bank account, unless evidence is provided to the contrary, the beneficial ownership of the funds in a sole bank account is generally the account holder.
The sort of relevant documentary evidence includes:
· information showing who contributed funds to the account
· in what proportions the contributions were made
· who drew on the account, and
· who used the money and the accrued interest as their own property.
Your case
In your situation it is considered the term deposits in question are jointly owned even though they are in your name as:
· the funds invested in the term deposits were withdrawn from a jointly owned account (account A)
· the interest earned from the special term deposit accounts has been credited into Account A which is in joint name
· on maturity of the term deposits, you have instructed the bank to deposit the capital in Account A and you and your partner will reinvest the capital in joint name.
It is considered the term deposits belong to you and your partner. Although the accounts were held in only your partner's name, you both have joint beneficial ownership of the moneys in equal shares. Therefore, interest income is to be returned equally. Thus you are assessable on 50% of the interest income earned from the term deposit accounts.
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