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Edited version of your private ruling
Authorisation Number: 1012429041165
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Ruling
Subject: Income
Question
Does interest income earned from a bank account held in trust for your parent, form part of your assessable income?
Answer
No
This ruling applies for the following periods
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
The scheme commenced on
1 July 2009
Relevant facts
You have a bank account which earns interest.
This account is held on behalf of your parent who is in a nursing home.
The funds are deposited from your parent's pension so that you can purchase everyday items and pay bills on their behalf.
This account is solely used for your parent's expenses.
Relevant legislative provision
Income Tax Assessment Act 1997 Section 6-5
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 Ruling IT 2486 considers the question of who should pay tax on the interest earned on accounts often referred to as children's savings accounts which are usually opened and operated by parents but some may be opened by others such as grandparents. 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?'. The circumstances in each case must be considered when determining whose money it is.
The types of evidence that may show that the ownership of the moneys in an account is someone other than the account holder/s are:
· information showing who contributed funds to the account,
· in what proportions the contributions were made,
· who drew on the account, and
· who used the money and accrued the interest as their own property.
In your case, you hold an investment account as trustee for your parent. The funds are deposited from your parent's pension so that you can purchase everyday items and pay bills on your parent's behalf. This account is used solely for your parent's expenses.
In accordance with IT 2486 it is accepted that the monies in the account do not belong to you. Therefore, the interest earned on the trust account is not assessable to you.