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Edited version of private ruling
Authorisation Number: 1011735534927
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Ruling
Subject : Assessable income - interest on joint account
Question:
Are you assessable on half of the interest earned on a joint account?
Answer:
Yes
This ruling applies for the following period
Year ending 30 June 2009
The scheme commenced on
1 July 2008
Relevant facts
You and your spouse held a joint bank account which earned interest in the recent financial year.
During a marriage breakdown, your spouse removed most of the funds from that account. The account was then closed..
Until the closure of the account you had access to the funds.
All the interest was earned during the period you had access to the account.
After the closure of the account you were refused access to the funds or interest income until you challenged the matter in court..
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a 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 and the general principle is that interest is derived when it is received or credited.
Taxation Determination TD 92/106 provides guidance on who should be assessed to interest earned on a joint bank account. Interest income is assessed to the persons who are beneficially entitled to the income (MacFarlane v. FC of T 86 ATC 4477 at 4486-7; (1986) 17 ATR 808 at 819-20)). That entitlement depends on the beneficial ownership of the moneys in the account.
The principle outlined in TD 92/106 applies in your case. The interest earned on the account was while it was in the joint names of you and your spouse during a period when you did have access to the funds. Your beneficial ownership of the moneys in the account was 50% and you are required to include in your assessable income 50% of the interest earned from the account for the relevant financial year as it is considered to be derived by you.