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Edited version of your written advice
Authorisation Number: 1012727046353
Ruling
Subject: Interest income
Question
Are you assessable on 50% of the interest income earned on the bank account held in your name?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2014
Year ending 30 June 2015
The scheme commences on:
1 July 2013
Relevant facts and circumstances
You sold an asset owned jointly with your spouse.
The proceeds from the sale were transferred to a bank account in your name only believing that the account was in joint names.
To date, all of your other bank accounts are in joint names. It is your intention to have joint names for all accounts.
Since the account was brought to your attention, you immediately attended the branch and had the account identified as jointly owned.
Interest was earned on the funds which were entirely received from the sale of the jointly owned asset.
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 of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Interest earned on bank accounts and term deposits is considered ordinary income under section 6-5 of the ITAA 1997.
Taxation Determination TD 92/106 provides that interest income on a joint bank account should be returned by taxpayers who are beneficially entitled to the income. That entitlement depends on the beneficial ownership of the moneys held in the account. The general presumption is that holders of accounts in joint names have joint beneficial ownership of the moneys in equal shares, unless evidence is provided to the contrary.
Although TD 92/106 refers to joint bank accounts, the same principle is applied for sole bank accounts. In the case of a sole bank account the beneficial ownership of the funds is generally the account holder. In determining the beneficial ownership, consideration is given to who contributed to the funds of the account and in what proportion and also who has withdrawn funds from the account.
In your case, the funds deposited into the bank account held only in your name were from the sale of an asset held jointly with your spouse. You have beneficial ownership of 50% of the funds in the account. Therefore, 50% of the interest earned from the bank account is attributable to you and should be included as assessable income in your income tax return.