Tax on Joint Bank Accounts

Who pays the tax on Joint Bank Accounts?

Tax on joint bank accounts, who pays?

On 26 April 2017, the Australian Taxation Office (“ATO”) released Taxation Determination TD 2017/11, which outlines that for income tax purposes, interest income on a bank account is assessable to the person or persons who “beneficially” own the money in the account.

This Determination replaces Taxation Ruling IT 2486 and a number of early Determinations such as TD 92/106, TD 92/182 and TD 93/148.

Interest income on a joint bank account is assessable to the account holders in proportion to their beneficial ownership of the money in the account.

Unless there is evidence to the contrary, it is presumed that joint account holders beneficially own the money in equal shares.

Relevant evidence can include information regarding –

  • Who contributed to the account,
  • In what proportions contributions were made,
  • The nature of the contributions,
  • Who drew on the account and who used the money (and accrued interest) as their own property.
  • Evidence may also be provided that joint account holders hold money in the account on trust for other persons.

Example 1 – Joint Bank Account: Rebutting Presumption of Equal Ownership

Barbara and Chelsey are each assessed to income tax on half of the interest not returned on their joint bank account.  Barbara later establishes that Chelsey contributed all of the money to the account and usually treated all of the interest as her money.  Barbara has only once drawn funds from the account.

Chelsey has beneficial ownership of the money in the account and is therefore assessable on all of the interest income.  The Commissioner amends Chelsey’s and Barbara’s income tax assessments accordingly.

Example 2 – Joint Signatory: No Beneficial Ownership of Account

Adrian’s elderly aunt has a bank account in her name and Adrian is a joint signatory to that account.  Adrian will only operate the account if his aunt is unable to do so due to ill health.  All the funds in the account are hers and Adrian is not entitled to personally receive any money from the account.

Adrian does not have any beneficial ownership of the money in the account and is therefore not assessable on the interest income.


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