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Edited version of your private ruling

Authorisation Number: 1012554391412

Ruling

Subject: Investment payments

Question

Do the quarterly payments from your investment form part of your assessable income?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

You have an investment.

You are paid a quarterly amount at a minimum rate of X% per annum.

You receive a quarterly payment in your bank account.

The quarterly statement calls your payment interest.

The bank refers to your quarterly payments as a dividend on your bank statement.

You are not in the business of investments.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision

Assessable income

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.

Based on case law, it can be said that ordinary income generally includes receipts that:

Under section 6-10 of the ITAA 1997, assessable income also includes statutory income.

An Australian resident shareholder is assessed on all dividends paid by a company out of profits derived from any source under section 44 of the Income Tax Assessment Act 1936 (ITAA 1936).

Taxation Ruling TR 98/1 sets out the Commissioner's policy on the derivation of income and states that investment income such as interest is generally derived when it is received or credited.

Your quarterly payments are not dividends under section 44 of the ITAA 1936 and have the characteristics of ordinary income. You derive the payments when they are credited to your account. That is, the payments are assessable in the income year of receipt and not at the maturity of your investment.

Therefore the quarterly payments are ordinary assessable income under subsection 6-5(2) of the ITAA 1997.

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