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Edited version of your written advice
Authorisation Number: 1051302964282
Date of advice: 1 November 2017
Ruling
Subject: Interest on joint bank account
Question 1
Are you required to declare the interest earned in a joint bank account which was paid to your ex-partner under a Family Court Order for the year ended 30 June 2017?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You are an Australian resident for taxation purposes.
You were the joint owner of a joint bank account with your ex partner.
The Family Court of Australia ordered on that your ex partner retain the funds held in the joint bank account and that you each do all things necessary to remove you as an account holder and signatory of the joint account and thereafter for your ex partner to be solely liable for and indemnify you and keep you indemnified in relation to the joint account.
You provided your ex partner with a signed authorisation form at settlement on to facilitate the account closure.
You have since become aware that the joint account has not been closed. You wrote to the bank to request the bank remove you as an account holder of the joint account. The bank has advised they cannot do that and that the funds would need to be removed from the account and the account closed.
You have written to your ex partner to request they transfer the funds into an account solely in their name and close the joint account. To date this has not occurred.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (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. Ordinary income has generally been held to include interest income and the general principle is that interest is derived when it is received or credited.
Interest income derived from a bank account that his held in the name of more than one individual or entity, should be included in the assessable income of each of those individuals or entities in accordance with the respective beneficial interests. Unless there is evidence to the contrary, it is presumed that joint account holders beneficially own the money in equal shares
In accordance with the guidance provided by Tax Determination TD 2017/11, as the Australian Family Law Court ordered the funds in the joint account, and therefore the interest income generated from it, be paid to you ex-partner it is considered that you did not have any beneficial interest in that account and income and you are not required to include such income in your own assessable income.