| Disclaimer This edited version has been archived due to the length of time since original publication.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 your private ruling
Authorisation Number: 1012017877573
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. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.
Ruling
Subject: children's bank accounts
Question
Is the interest earned on money held in a term deposit in your child's name assessable to you?
Answer: Yes
This ruling applies for the following periods
Year ending 30 June 2012
Year ending 30 June 2013
The scheme commenced on
1 July 2011
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
A term deposit was opened in the name of your young child.
The funds placed in the term deposit were your funds.
You placed the funds in an account in your child's name due to family issues.
The money belongs to you and you can spend the money at your own discretion.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 states that if you are an Australian resident, your assessable income includes ordinary income received from all sources, whether in or out of Australia. The definition of ordinary income includes interest income.
Taxation Ruling IT 2486 provides guidelines on who is assessable for children's income. The ruling states that children's savings accounts may be held with a bank, credit union, building society or other financial institution. The accounts are usually opened and operated by parents but some may be opened by others such as grandparents. Many accounts are opened in the names of the children while others are called trust accounts.
Regardless of the name and type of the account, the essential question that must be asked is: 'Whose money is it?'. If the money really belongs to the parent, in the sense that they provided the money and may spend it as they like, then the parent should include the interest in their return.
If the account is made up of money the child has received as birthday or Christmas presents, pocket-money or money from activities such as newspaper rounds, then the money in the account should be regarded as that of the child. On the other hand, where an account is opened by a parent with funds from the parent in a child's name, and the parent spends or intends to use the funds in the account as if they belonged to the parent, the money in the account will be treated as belonging to the parent.
In this case money was placed in a term deposit in the child's name. The funds used to open the term deposit were funds belonging to you. The money belongs to you and you intend to spend it as you wish. The interest earned from this account is considered to be yours and should be declared in your 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).
