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Edited version of your private ruling
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Ruling
Subject: Assessable income- interest/joint bank account
Question
Are you assessable on 100% of the interest income from bank accounts where you are listed as a joint account holder?
Answer
Yes
This ruling applies for the following periods
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
The scheme commences on
1 July 2012
Relevant facts and circumstances
You and a family relative opened joint bank accounts.
You closed your previous bank accounts and transferred the funds to new joint accounts.
Your relative has not contributed any money to either account.
The new accounts were opened to avoid the burden and cost of probate in the event of your death. Other than this, your relative will only access the account on your instructions if you become housebound.
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) specifies that residents of Australia are assessable on income derived from all sources in and out of Australia.
Interest income is considered ordinary income and therefore is assessable under section 6-5 of the ITAA 1997.
Taxation Determination TD 92/106 which deals with who should be assessed to interest earned on a joint bank account, states at paragraph 1 that interest income on a joint bank account is assessed to the persons who are beneficially entitled to the income (MacFarlane v FC of T 86 ATC 4477; (1986) 17 ATR 808). The entitlement depends on the beneficial ownership of the money in the account. The general presumption is that holders of accounts in joint names have joint beneficial ownership of the moneys in equal shares. This presumption is rebuttable by evidence to the contrary (see Case Z7 92 ATC 131; AAT Case 7675 (1991) 22 ATR 3591).
Evidence relevant in determining an individuals beneficial entitlement includes information as to who contributed to the account, in what proportions the contributions were made, who drew on the account, who used the money and who the interest is distributed to.
In your case, all the funds in the account belong solely to you and you have entitlement to personally receive any money from this account. Your family relative is only a joint holder in order to have full access to the account in the event of your death. In these circumstances you have the legal and beneficial entitlement to the interest from the joint accounts and are therefore taxable on all of the interest from these accounts.
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