| Disclaimer This edited version has been archived due to the length of time since original publication.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 your private ruling
Authorisation Number: 1012114036065
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: interest income
Question
Is the interest income on money's belonging to your children form part of your assessable income?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2011
Year ended 30 June 2012
The scheme commenced on
1 July 2010
Relevant facts
When your relation died, some money was left for your children under the will.
You set up bank accounts to deposit your children's proceeds from the deceased estate.
No other money is in the accounts.
The money is for the children's use only. You do not use the money for your own needs.
Your children are under 18 years of age.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 6-5.
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Interest income is regarded as ordinary income.
Taxation Ruling IT 2486 provides guidelines on who is assessable on income derived from children's bank accounts. The ruling states that children's savings accounts may be held with a bank, credit union, building society or other financial institution. The accounts are usually opened and operated by parents. Many accounts are opened in the names of the children while others are called trust accounts.
Regardless of the name and type of the account, the essential question that must be asked is: 'Whose money is it?' If the money really belongs to the parent, in the sense that they provided the money and may spend it as they like, then the parent should include the interest in his or her return.
On the other hand, if the account is made up of money the child has received as birthday or Christmas presents, pocket-money or money from newspaper rounds, then the money in the account should be regarded as that of the child.
In your case, you have deposited money from your late relation's estate into bank accounts for your children.
After reviewing your specific circumstances, it is considered that the funds in the bank accounts belong to your children and not yourself. The facts which support this conclusion are as follows:
1. the money in the funds were not provided by you, but bequeathed to your children,
2. you do not withdraw any money from the account for your own use,
3. the money is being kept for your children's use only, and
4. the reason your name is on the account is because your children are under 18 years of age.
Applying the principles of IT 2486, as you are not the beneficial owner of the funds, the income from these bank accounts that hold your children's money is not assessable income to you.