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Edited version of private ruling
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Ruling
Subject: Bank account beneficial ownership
Question:
Are you assessable on all of the interest earned on a bank account held in joint names?
Answer:
Yes
Relevant facts
You and your child hold a bank account in joint names. Your child has an enduring power of attorney to act on your behalf. The moneys in the account are beneficially owned by you and are solely used for your benefit. Your child is a joint account holder to enable them to manage your bank account on your behalf as you are unable to manage your own financial affairs.
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 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 accounts, 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, the account is in your name and in the name of your child who has power of attorney over your affairs. The money deposited in the account belongs to you, and the interest income earned on the account is your income.
Your child, who has power of attorney, has no beneficial entitlement to the money in this account and has no entitlement to any interest income.
As you hold the beneficial entitlement to the interest, you are assessable on the interest income derived from this account.