| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1012508860191
Ruling
Subject: Interest income
Question 1
Is interest income earned on funds held in trust for two parties and granted to one party assessable income to the other party?
Answer
No
This ruling applies for the following period:
Year ended 30 June 2013
The scheme commences on:
1 July 2012
Relevant facts and circumstances
Funds were held in trust pending the resolution of an outcome.
The funds were held in a joint interest bearing account in two names.
The outcome stipulated that only one party is entitled to the funds currently invested in trust.
Relevant legislative provisions
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 includes income according to ordinary concepts that was derived by you. Interest received is generally considered to be ordinary income.
Taxation Determination TD 92/106 provides guidance on who should be assessed to interest earned on a joint bank account. Interest income is assessed to the persons who are beneficially entitled to the income (MacFarlane v. Federal Commissioner of Taxation (1986) 13 FCR 356; 86 ATC 4477 at 4486-7; (1986) 17 ATR 808 at 819-20). That entitlement depends on the beneficial ownership of the monies in the account. The general presumption is that the account holders have joint beneficial ownership of the moneys in equal shares. This presumption can be rebutted with evidence to the contrary.
In your case the interest bearing account which held the funds in trust pending an outcome, was opened in two names. This would indicate that both parties have joint beneficial ownership of these funds. However, the outcome stipulated that only one party is entitled to the funds currently invested in trust. It is therefore the party who has beneficial entitlement to the funds that would be assessed on the interest income.