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Edited version of your private ruling
Authorisation Number: 1012450025900
Ruling
Subject: Interest income
Question
Are you assessable on interest earned on an immigration bond supplied by your relatives?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
Year ended 30 June 2018
The scheme commences on:
1 July 2012
Relevant facts and circumstances
Your relatives migrated to Australia.
A mandatory immigration bond was required as part of their visa application.
The bond must be held in your name as the sponsor. The bond is held for 10 years.
The bond was supplied by your relatives. Any interest accruing on the bond is deposited into your relatives' savings account.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 6-5(1)
Reasons for decision
Interest income is assessable under subsection 6-5(1) of the Income Tax Assessment Act 1997 as ordinary income.
The person who derives the income is the person who is assessable for any tax on that income.
In certain circumstances, interest income that is earned by a taxpayer through money held in an account in their name may not be assessable for the tax on that income. This is the case in situations where the money is held in trust.
Taxation Ruling IT 2486 discusses the issue of money held in trust for another person. The circumstances in each case must be considered when determining whose money it is.
In your situation, your relatives provided you with money to pay a mandatory bond. The account is in your name, as was required under the terms of their visa. Any interest earned on that money is deposited into your relatives' account.
It is considered that in this situation, the funds belong to your relatives and were merely held in trust by you, as sponsor, in accordance with the terms of their visa. As such, the interest earned on the bond is considered to be derived by your relatives' and assessable to them, not you.