| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1012554409453
Ruling
Subject: interest - children's bank accounts
Question
Are you assessable on the interest earned from a bank account held in your parent's name as trustee for you?
Answer
Yes
This ruling applies for the following period:
Year ended 30 June 2013
The scheme commences on:
1 July 2012
Relevant facts and circumstances
You inherited a sum of money from your parent's estate.
Your surviving parent invested this money on your behalf. The account is held in their name as trustee for you, and was originally opened with their own tax file number.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that assessable income includes income according to ordinary concepts that was derived by you. Interest received is generally considered to be ordinary income.
Taxation Ruling IT 2486 considers the question of who should pay tax on the interest earned in children's bank accounts.
IT 2486 provides that the essential question that must be asked is 'whose money is it?' The answer to this question is based on the facts of the case. If the account is made up of money the child has received as birthday or Christmas presents or pocket money, then the money in the account should be regarded as that of the child. However, if the money really belongs to the parent, in the sense that they provided the money and may spend it as he or she likes, any interest should be included in the parent's return.
As a general rule, where the ATO is satisfied that the money in the account really belongs to the child, it will not insist on a strict application of the trust provisions of the taxation law where the account is operated by a parent as trustee. Where the interest is shown in a tax return lodged by a child a trust tax return will not be necessary.
In your case, money was left to you in your parent's will and is held in an account in your surviving parent's name as trustee for you.
In these circumstances, in accordance with IT 2486, the money in the account is considered to belong to you. Therefore, the interest income earned on the account is assessable to you.