Edited version of your private ruling

Authorisation Number: 1011970226746

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. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: Income - interest

Question 1

Is 50% of the interest earned on a term deposit, which is held in your name, assessable income to you and the remaining 50% assessable income to your spouse?

Advice/Answers

No.

Question 2

Is the interest earned on a term deposit, which is held in your name, 100% assessable income to you?

Advice/Answers

Yes.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Prior to and part way during 2009 both you and your spouse received a part pension from Centrelink which each fortnight was paid into your individual bank accounts.

At the end of each financial year, you received individual group certificates from Centrelink.

During 2009-10, you became a beneficiary to an estate.

You notified Centrelink and both you and your spouse's part pension payments ceased during 2009.

You invested the money received from the estate into a term deposit in an account under your name.

You withdrew the interest earned from the term deposit to enable both you and your spouse to maintain similar fortnightly payments in lieu of the Centrelink pension.

It was your understanding that if you and your spouse maintained the same individual payments from the term deposit interest, you would both equally be assessed on your shares of the interest income.

Your taxation consultant informed you that the money from the estate should have been paid into both you and your spouse's accounts in order for the interest to be assessed individually.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Interest earned on bank accounts and term deposits is considered ordinary income under section 6-5 of the ITAA 1997.

Taxation Determination TD 92/106 provides that interest income on a joint bank account should be returned by taxpayers who are beneficially entitled to the income. That entitlement depends on the beneficial ownership of the moneys held in the account. The general presumption is that holders of accounts in joint names have joint beneficial ownership of the moneys in equal shares, unless evidence is provided to the contrary.

Although TD 92/106 refers to joint bank accounts, the same principle is applied for sole bank accounts. In the case of a sole bank account the beneficial ownership of the funds is generally the account holder. In determining the beneficial ownership, consideration is given to who contributed to the funds of the account and in what proportion and also who has withdrawn funds from the account.

In your case, the money deposited into the term deposit was from a deceased estate to which you were a beneficiary. The account is held only in your name and all drawings of funds from the term deposit are made by you. Therefore, it is considered that the interest earned from the term deposit is 100% attributable to you and should be included as assessable income in you income tax return.