Edited version of private ruling

Authorisation Number: 1011752778638

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Ruling

Subject: Assessability of income - beneficial ownership

Question:

Are you assessable on 50% of the income from option trading activities carried out between you and your spouse which are conducted through a trading account which is solely in your name?

Answer: Yes

This ruling applies for the following periods:

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You and your spouse commenced trading options on a foreign stock exchange.

The capital for this activity came from joint accounts.

You were required to open a special trading account in order to trade these particular options. The trading account needed to be with an overseas company which required significant documentation to open the account to ensure that the account was not being used for improper purposes.

At the time of opening the trading account, your spouse was overseas and thus the account was opened in your name only.

You acknowledge that the original trading account should have been opened in joint name. However, due to the nature of the account, and certain other requirements, it is not easy to close the account and reopen it in joint name.

It has always been the intention of you and your spouse that the money made from the trading account is joint income. You both consider you have beneficial ownership of the funds.

You both use your expertise and experience to make decisions regarding your option trading activities. You both possess extensive local and international option trading knowledge which has been gained over a long time period.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 6-5(2).

Reasons for Decision

Income derived from option trading activities is assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997). In order to consider who is assessable on income derived by two persons carrying on option trading activities through an option trading account which is in one person's name, we need to consider the concept of beneficial entitlement.

Taxation Determination TD 92/106 deals with bank interest income and beneficial ownership. TD 92/106 provides that interest income from 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 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 special option trading account is jointly owned even though it is solely in your name as:

· the capital invested in the option trading activities came from jointly owned funds

· you both use your expertise and experience to make decisions regarding your option trading activities. You both possess extensive local and international option trading knowledge which has been gained over a long time period.

· it has always been the intention of you and your spouse that the money made from the trading account is joint income. You both consider you have beneficial ownership of the funds.

· your spouse was overseas when the trading account was opened. The trading account needed to be with an overseas company and significant documentation was required to ensure the account would not be misused.

· you acknowledge that the original trading account should have been opened in joint name. However, due to the nature of the account, and certain other requirements, it is not easy to close the account and reopen it in joint name.

It is considered the option trading account belongs to you and your spouse. Although the account is held in only your name, you both have joint beneficial ownership of the moneys in equal shares. You both use your combined expertise and experience to make decisions regarding your option trading activities. Therefore income earned from your option trading activities is to be returned equally. Thus you are assessable on 50% of the option trading income.

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