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Edited version of your written advice
Authorisation Number: 1012880657692
Date of advice: 17 September 2015
Ruling
Subject: Assessable Income
Question
Is interest derived and reportable at the time your term deposit matures?
Answer
Yes.
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
The scheme commences on:
1 July 2012
Relevant facts and circumstances
You invested in a term deposit payable on maturity in 20XX.
The account is under your name solely.
You receive yearly statements which show $0 interest paid to you.
Your bank has told you that you have not been paid any interest in the year and will not until the investment matures.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5,
Income Tax Assessment Act 1997 Subsection 6-5(1),
Income Tax Assessment Act 1997 Subsection 6-5(2) and
Income Tax Assessment Act 1997 Subsection 6-5(4).
Reasons for decision
Subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that your assessable income includes income according to ordinary concepts, which is also known as ordinary income. Interest received on a term deposit is income according to ordinary concepts.
Interest is assessable income under section 6-5 of the ITAA 1997 in the year in which it is received ((1958) 9 TBRD Case J20; 7 CTBR (NS) Case 130; and (1958) 9 TBRD Case J60; 8 CTBR (NS) Case 50).
Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
Subsection 6-5(4) of the ITAA 1997 states that a taxpayer derives an amount of ordinary income when the amount is:
• received by the taxpayer; or
• dealt with on the taxpayer's behalf or as the taxpayer directs.
Application to your circumstances
You will be credited with interest on the maturity of the term deposit; you have not been accruing interest yearly. Accordingly, the interest is derived in the year of income that it is credited to the principal sum of the investment.
Your interest will be reportable as assessable income in the year received.