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Edited version of your written advice
Authorisation Number: 1013024766813
Date of advice: 27 May 2016
Ruling
Subject: Interest income from joint bank account
Question 1
Are you required to declare the interest earned in a joint bank account which was paid to your ex-partner under a Family Court Order for the year ended 30 June 2015?
Answer:
No.
Question 2
Are you required to declare the interest earned in a joint bank account which was paid to your ex-partner under a Family Court Order for the year ended 30 June 2016?
Answer:
No.
Issue 2
Question 1
Are you entitled to apportion interest accrued for the year ended 30 June 2015 (not paid directly to your ex-partner) based on the agreed final proportional property split?
Answer:
Yes.
This ruling applies for the following period(s)
Year ended 30 June 2015
Year ended 30 June 2016
The scheme commenced on
1 July 2014
Relevant facts and circumstances
The proceeds from the sale of you and your ex-partner's residential property were deposited to a joint bank account. This account was opened specifically for this purpose and was conducted in both your name and your ex-partner's name and was the subject of a Family Law Court matter.
Interest accrued on the proceeds of the account until the date of final property settlement during the year ended 30 June 2016.
Under an Order of the Family Law Court your ex-partner was to receive all interest accrued on the account.
The accrued interest from the account was taken from the aforementioned account to another account held in joint names. The capital proceeds remained in the former account. This new account was transacted solely upon and for the sole benefit of your ex-partner.
Under the Family Court Order you were to pay your ex-partner a stated sum per month from the accrued interest and to make up any shortfall from your own funds.
Your ex-partner was to receive these payments from the date of the Family Court Order and this continued until you reached a settlement.
The Family Law Court matter has now been resolved and you are currently in the process of having your name removed and/or the joint account closed.
You have not received the benefit of the interest accrued on the deposit funds since the Family Court Ordered that the funds be paid to your ex-partner until you reached settlement.
Residual interest accrued on the account and was added to the principal sum which was then apportioned in accordance with an agreement between you and your ex-partner.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Interest income derived from a bank account that his held in the name of more than one individual or entity, should be included in the assessable income of each of those individuals or entities in accordance with the respective beneficial interests.
Taxation Determination TD 92/106 Income tax: who should be assessed to interest earned on a joint bank account? provides, guidance on who should include interest earned on a joint bank account in their assessable income.
TD 92/106 explains that such interest is to be declared by the persons who are beneficially entitled to the income. That entitlement depends on the beneficial ownership of the monies in the account. The general presumption is that the account holders have joint beneficial ownership of the moneys in equal shares. This presumption can be refuted with evidence to the contrary.
The capital proceeds from the sale of you and your ex-partner's residential property were deposited into a joint bank account. The Family Court ordered that interest accrued from these proceeds were to be paid to your ex-partner by way of spousal maintenance. These payments continued until you and your ex-partner reached agreement.
In accordance with the guidance provided by TD 92/106, as the Family Law Court ordered the interest income be paid to you ex-partner for the period outlined, you did not have any beneficial interest and you are not required to include such income in your own assessable income.
Similarly, you are entitled to apportion interest accrued for the year ended 30 June 2015 (not paid directly to your ex-partner) based on the property split agreement reached between you and your ex-partner.
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