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Edited version of your written advice
Authorisation Number: 1051238587651
Date of advice: 21 June 2017
Ruling
Subject: Assessable income - Joint bank account
Question 1
Are you assessable on the interest income from a bank account in which you are listed as a joint account holder?
Answer
No
This ruling applies for the following periods:
The year ending 30 June 2018
The year ending 30 June 2019
The year ending 30 June 2020
The year ending 30 June 2021.
The scheme commences on:
1 July 2017
Relevant facts and circumstances
Your parent is no longer employed.
Your parent’s income consists of an aged pension and bank interests.
Due to your parent's advancing years, you have added your name to their term deposit bank account as a joint account holder, with full access to the accounts, so as to ensure that you have access to your parent’s finances in the event their death or disability.
The intention is that your parent would have sole benefit of the account.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
Reasons for decision
Summary
You are not assessable on the interest income earned from the bank account in which you are listed as a joint account holder with your parent.
Detailed reasoning
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) specifies that residents of Australia are assessable on income derived from all sources in and out of Australia.
Interest income is considered 'ordinary income' and therefore is assessable under section 6-5 of the ITAA 1997.
Taxation Determination TD 92/106 explains who should be assessed on interest earned from a joint bank account and states at paragraph 1 that interest income from a joint bank account is assessed to the persons who are beneficially entitled to the income (MacFarlane v. Federal Commissioner of Taxation (1986) 13 FCR 356; 86 ATC 4477; (1986) 17 ATR 808). 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 (see Case Z7 92 ATC 131; AAT Case 7675 (1991) 22 ATR 3591).
Interest income on a joint bank account should therefore be returned by taxpayers according to who has the beneficial entitlement to the interest. Normally it is appropriate to assess the interest derived on a joint bank account to the account holders in equal shares. However, claims as to different entitlements to interest should be supported by evidence.
Evidence relevant in determining an individual's 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 to whom the interest is distributed.
The funds in bank accounts that were originally in the names of both your parents were consolidated into one account following a parents’ death. You have provided bank statements of each account that was consolidated, showing that you were not a joint account holder prior to consolidation. This demonstrates that you had no beneficial ownership of the capital or at the time of consolidation.
The interest in the account has been continually capitalised and you have made no withdrawals from the account. You have provided two years of bank statements that substantiate this assertion. This shows that you have not derived any financial benefit from being a joint account holder in your parent’s term deposit.
You have derived no financial benefit from being a joint account holder of your parent’s term deposit bank account. This is clarified by the fact that you have received no interest payments, nor did you contribute any capital funds when they were consolidated into one account. It is clear that you do not have beneficial ownership of this bank account and you are therefore not assessable on interest income accrued from that bank account.
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