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Edited version of your private ruling
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Ruling
Subject: assessability of interest income
Question
Is the interest income from the accounts held 'in trust' for your disabled relative assessable income to you where you are the trustee for the account?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2012
Year ended 30 June 2013
The scheme commenced on
1 July 2011
Relevant facts
You hold Power of Attorney and Enduring Guardianship for your relative who is disabled due to a car accident.
After the sale of their house it was necessary for someone else to manage their funds and debts. The money from the sale of the house is the source of the funds held in the accounts in your name as trustee.
The funds are held in an investment account. There is a transaction account that is linked to the high interest investment account, which is necessary to pay all of the bills.
Interest income has been derived from this high interest account.
You have applied to all his service providers - power, water, body corporate, community care, Centrelink, and others, to have all correspondence sent directly to you and you pay all accounts electronically from the transaction account. You have full records of all outgoings.
There is a separate bank account that you transfer money to, so that they can meet personal expenses through ATM withdrawals.
You have provided sample copies of bank account statements that verify this process.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
The liability to taxation on interest income is subject to the principles of common law and the law of equity, modified by any relevant legislation, including the Income Tax Assessment Act 1997. A taxpayer is liable to taxation on the interest income where the taxpayer has beneficial entitlement to the monies in the account.
In the account, with you as trustee, the source of the funds is from the sale of their house. The funds in the account are only used for the purposes of meeting their expenses. They have sole beneficial entitlement to the monies in the account and will be assessable on the interest income that is derived in the account.
You are not assessable on the interest income in the account where you act in the role of trustee because you hold Power of Attorney and Enduring Guardianship.
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