Edited version of your written advice

Authorisation Number: 1012729591231

Ruling

Subject: Interest

Question

Is all of the income from the term deposit accounts which you and your children hold in joint names solely assessable to you?

Answer

Yes.

This ruling applies for the following periods

Year ended 30 June 2015

Year ended 30 June 2016

Year ended 30 June 2017

Year ended 30 June 2018

Year ended 30 June 2019

The scheme commenced on

1 July 2014

Relevant facts

You are an aged person, and set up bank accounts to deal with proceeds from a number of term deposits which you inherited.

You paid large legal costs to have the inherited funds transferred to your name.

You have set up term deposits in the joint names of yourself and each of your children.

This is so that should you pass away, each of the children will then have access to the joint account funds without expensive transfer fees.

You placed a number of conditions on these term deposit accounts.

Your children's names are on the account solely to enable them to access funds from the accounts once you pass away.

You are a self-funded retiree and rely solely on the income from the accounts.

All the monies held in the accounts and interest earned are solely for the use of you while alive.

You setup and operate the accounts by yourself.

Your children have not received any monies from the account, and interest earned is all credited to your savings account.

You use the interest earned to maintain your present lifestyle, and you are mindful that you may need aged care in the future.

Your children have not contributed to the accounts.

Your children have had no benefit from interest accrued in any of the accounts held in both names. 

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision

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

Taxation Determination TD 92/106 Income tax: who should be assessed to interest earned on a joint bank account? deals with the issue of the assessability of interest earned on a joint bank account. It states that interest income on a joint bank account should be assessed to the persons who are beneficially entitled to the income (MacFarlane v. FC of T 13 FCR 356; 86 ATC 4477; (1986) 17 ATR 808). That entitlement depends on the beneficial ownership of the money in the account.

Evidence relevant in determining the beneficial entitlement includes information as to who contributed to the account, in what proportions the contributions were made, the nature of the contributions, who drew on the account, and who used the money and the accrued interest as their own property.

In your case only you have contributed monies to the accounts.

The monies in the accounts are held specifically for your welfare and care, and your children's names are on the accounts only to enable them to access the funds on inheritance.

Your children have not received any money from the accounts.

The conditions placed on the term deposits by you suggest that your children have no beneficial entitlement to the money in the accounts or to any interest income which is derived.

Accordingly you are solely assessable on the interest income derived from these accounts.

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