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Edited version of private ruling
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Ruling
Are you assessable on half of the interest income derived from an account held in your name only?
Yes.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts and circumstances
You opened a bank account in one name when you arrived in Australia.
The funds deposited into this bank account were jointly contributed by a transfer of funds from your overseas account, held jointly with your spouse.
When your spouse arrived, you arranged an authority on the account so that your spouse could have access to the funds.
You and your spouse have withdrawn funds from the account.
The funds held in this account earn interest.
You have now closed the account held in one name and transferred the funds into a joint account held with your spouse.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
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 which deals with who should be assessed to interest earned on a joint bank account, states at paragraph 1 that interest income on 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).
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 your case, all the funds in the account were contributed jointly. You and your spouse have full access to the account even through the account is held in one name. You and your spouse use the funds from this account jointly. Given these circumstances, both you and your spouse have beneficial entitlement to the money held in this account and the interest derived. Therefore, you are assessable on only half of the interest income held in this account under section 6-5 of the ITAA 1997.