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Edited version of private ruling
Authorisation Number: 1011662392493
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Ruling
Subject: Income-interest
Does the interest from an account held in trust by you for your child form part of your assessable income?
No.
This ruling applies for the following period
Year ended 30 June 2009
Year ended 30 June 2010
The scheme commenced on
1 July 2008
Relevant facts
You have a child, who is totally dependant on you and their carers for all facets of daily life.
You have opened a bank account as trustee for your child.
All funds into the account have been derived in main from monies your child receives from Centrelink.
You do not withdraw funds from this account for any personal use, all funds are used to provide daily care for your child.
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 includes income according to ordinary concepts that was derived by you. Interest received is generally considered to be ordinary income.
Interest income from bank accounts is assessable to the person who derives the income and is beneficially entitled to the income. The person/s in whose name the investment is taken out will generally be considered to be beneficially entitled to the income from the bank account unless there is evidence to the contrary.
In special circumstances, interest income that is earned by a person through monies held in an account in their name may not be assessable for the tax on that income.
Taxation Ruling IT 2486 discusses the issue of money held in trust for another person. IT 2486 states that regardless of the name and type of the account, the essential question that must be asked is: 'Whose money is it? The circumstances in each case must be considered when determining whose money it is.
The types of evidence that may show that the ownership of the moneys in an account is someone other than the account holder/s are:
· information showing who contributed funds to the account
· in what proportions the contributions were made
· who drew on the account, and
· who used the money and accrued the interest as their own property.
In your case, you have a child who is totally dependant on you and their carers for their daily needs. You hold a trust account in the name of your child where their payments are deposited.
You advised that the monies in the account are held specifically for the welfare and care of your child, and your name is on the account to enable you to access funds needed to meet your child's everyday expenses. You have not received any money from the accounts, you do not use the money in the account for your benefit and the interest is also not retained by you.
Accordingly, you are not assessable on the interest income derived from this account.