Edited version of private advice

Authorisation Number: 1052404298782

Date of advice: 03 June 2025

Ruling

Subject: Assessable income

Question

Is the interest you receive from your bank assessable as ordinary income under section 6-5 of Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are an Australian resident for tax purposes.

In XX/20XX, you arrived in Australia as a refugee from Country X.

Following your arrival, you were permitted stay in Australia under a visa.

You became an Australian citizen.

You retain ownership of a savings account and an investment certificate; however, you do not have control over the account as it has become inactive.

It is not possible for you to return to Country X to activate your bank account.

Australia does not contain any branches of your bank.

For security reasons, you cannot travel overseas to any country that contains the bank branches.

You cannot access online services or use a power of attorney to activate your bank account.

Every X months you were to receive interest into your bank account. The interest amounts accumulated in your account unless you gave notice that you wanted to withdraw the amounts.

You currently do not have control over the bank account in which the interest is held.

You have not withdrawn any amounts from the bank account during the ruling period.

On XX/XX/20XX, your bank contacted you to advise that your identification number is dormant and that you can activate it through branches to commence using the online services. Your bank also advised that they were unable to send an account statement via email and that your interest was XX per annum.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Reasons for decision

Summary

The Commissioner considers that the interest from a savings account is ordinary income but is not assessable if it has not 'come home' the taxpayer.

Detailed reasoning

Subsection 6-5(1) of the ITAA 1997 states that your assessable income includes income according to ordinary concepts, which is called ordinary income.

Subsection 6-5(2) of the ITAA 1997 states that if you are an Australian resident, your assessable income includes the ordinary income you derived directly or indirectly from all sources, whether in or out of Australia during the income year.

Subsection 6-5(4) of the ITAA 1997 states in working out whether you have derived an amount of ordinary income, and (if so) when you derived it, you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct.

Chapter 4 of the Explanatory Memorandum to the ITAA 1997 provides that amounts received still need to have all the attributes of ordinary or statutory income before it is treated as such. You still need to have 'derived' the income.

Ordinary income has generally been held to include three categories: namely, income from rendering personal services, income from property and income from carrying on a business.

Other characteristics of income that have evolved from case law include receipts that:

(a) are earned

(b) are expected

(c) are relied upon, and

(d) have an element of periodicity, recurrence or regularity.

If the income has characteristics of the four listed above, then it can be considered as ordinary income under section 6-5 of the ITAA 1997.

In your case, the money made on interest to your savings account are earned, expected, relied upon and has an element of regularity (half yearly), therefore receipt is ordinary income under section 6-5 of the ITAA 1997.

However, where the funds are locked to an account, or inaccessible to you until a condition of release is met, the funds will not be derived until the condition of release is met and the funds are accessible or can be dealt with in any way, on your behalf, or as you direct.

The case Commissioner of Taxes (SA) v Executor Trustee and Agency Co of South Australia Ltd (1938) 63 CLR 108, 154-5 noted in the assessment of income, the object is to discover what gains have occurred during the period of account 'come home' to the taxpayer. This establishes that for a receipt of ordinary income to be assessable under section 6-5 of the ITAA 1997 it must 'come home' to the taxpayer.

Although interest was credited to your account, you were not able to access them, or have them applied or dealt with in any way on your behalf or as you directed. You were notified that your account was deactivated and that no withdrawals would be possible. The funds are not accessible to you, and you cannot otherwise deal with them in any way.

The Commissioner considers that the interest amounts have not 'come home' to you and therefore you have not yet derived the interest amounts. Accordingly, the interest amounts will not be assessable as ordinary income under subsection 6-5(4) of the ITAA 1997, until such time the amounts can be applied or can be dealt with in any way, on your behalf or as you direct.