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Ruling

Subject: Interest income

Question

Is your share of the interest income from an interest bearing account included in your assessable income?

Answer

Yes.

This ruling applies for the following periods

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commenced on

1 July 2012

Relevant facts

You and some others formed a syndicate in the relevant year with the intention of purchasing an asset. However this did not eventuate.

You now wish to transfer these funds from a non-interest bearing account to an interest bearing account.

The funds are in a financial institution under two syndicate members' names only. This was done for ease of operation.

Each individual has contributed an equal amount of money. No other additional deposits or withdrawals have been made.

The syndicate has a written agreement in relation to the funds and their activities. The funds are to be used to purchase an asset and will not be used for private purposes. Future fee deposits or joint income will be made into the account.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources during the income year. Ordinary income has generally been held to include interest income.

Interest income from bank accounts is assessable to the person who derives the income and is beneficially entitled to the income. The person/s in whose name the investment is taken out will generally be considered to be beneficially entitled to the income from the bank account unless there is evidence to the contrary.

Taxation Determination TD 92/106 which deals with who should be assessed to interest earned on a joint bank account states that interest income on a joint bank account is assessed to the persons who are beneficially entitled to the income. 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.

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 this case, you are a member in a syndicate. The account is opened in the names of two syndicate members however each of the other members of the syndicate also contributed an equal amount of funds into the account.

Based on the information provided, it is considered that the funds belong to each syndicate member equally. That is, a share of the associated interest income should be declared on each member's tax return as assessable income.

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