| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011745807071
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: interest income
Question
Is 50% of the interest earned on your term deposit assessable to you?
Answer
Yes.
This ruling applies for the following period:
Year ended 30 June 2010
The scheme commences on:
1 July 2009
Relevant facts and circumstances
You have a term deposit in your name.
You and your partner contributed funds to the term deposit, in approximately equal shares.
You intend to use the term deposit funds to make a joint property purchase with your partner.
In a financial year, the term deposit accrued interest.
You transferred the interest to another account, which is held jointly in equal shares with your partner.
You have stated that the interest earned on this account has been arranged to be split 99% to your partner and 1% to you. You want to split the interest proceeds from the term deposit in this manner.
You have stated that you want to split the interest income this way as your partner is a low income earner.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
Reasons for decision
Interest income is assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997).
Taxation Determination TD 92/106 states that interest income on a joint bank account should be returned by taxpayers in accordance with their beneficial interests, otherwise the interest will be assessed to the account holders in equal shares.
The general presumption is that holders of accounts in joint names have joint beneficial ownership of the monies in equal shares, unless evidence is provided to the contrary.
The sort of relevant documentary evidence includes:
· information showing who contributed the funds to the account,
· in what proportions the contributions were made,
· who drew on the account, and
· who used the money and the accrued interest as their own property.
In your case, you have a term deposit account held in your name only. You and your partner contributed funds to the term deposit, in approximately equal shares. The interest accrued on the term deposit was transferred into you and your partner's joint bank account.
We consider that the general presumption of joint beneficial ownership applies in your case. As the funds were contributed to the term deposit in equal proportions and you intend to use them to jointly purchase a property, there is no evidence to rebut this presumption. Further, our records show that the account is held by you and your partner in equal shares.
For these reasons, the interest income should be declared according to your beneficial interest, that is, your 50% share.