Taxable Income – What You Need to Know

WHAT YOU NEED TO KNOW

Generally, when you deposit money into your savings account, you receive an interest rate as part of your income, which is taxable. The Australian Taxation Office (2018), may send a letter showing a schedule about your income if your bank claims to have paid you interests although this won’t match the interest income you’d declare in your tax return.
Therefore, the letter will outline information from your tax return compared to those the ATO holds.

 

WHO CAN DECLARE INTERESTS?

The person who needs to claim the interest from an account may vary according to the account type.

 

According to the ATO account holders are categorised as follow:

INDIVIDUALS

Declare you interests if you have earned interest from an account that is under your name only.

JOINT ACCOUNTS

Joint account holders have equal beneficial ownership of the funds (for example, 50% each for two account holders or 25% each for four account holders). If the actual beneficial ownership of the account is not in equal shares you must be able to prove the following:

• the source of the funds (for example, bank deposit records)
• the proportion and nature of the contributions
• who used the funds and interest

ACCOUNTS HELD FOR A CHILD

Interest must be declared by the person who owns or uses the funds in the account.
The parent (or guardian) owns the funds if they deposit the money and spend it as they like, therefore, the parent includes the interest in their tax return.

ACCOUNTS HELD IN TRUST

Accounts held in trust for other individuals (for example, for a client of a solicitor or real estate agent), should have one of the following in its name:
• in trust for (ITF)
• as trustee for (ATF)
• on behalf of (OBO).

The person who benefits from the funds or has the power to alter transactions, should declare the income.
If you hold an account in trust for another person or entity, you will need to send the ATO a copy of a bank statement showing the correct ownership of the account.

NON-RESIDENTS

Non-residents during the income year who received Australian-sourced bank interest – are required to pay tax at the non-resident withholding rates on any interest income you received.

WHAT TO DO IF YOU RECEIVE THE LETTER

Let’s assume you disagree with the information stated in the document, then you’ll have to make contact with the ATO and support your appeal with the appropriate documentation.
If you lodge with a trusted tax agent, you’re fully responsible of all the information stated on your tax return papers.

 

While, here at Online Tax Return, our tax professionals review our tax content daily for you to have a better understanding, they are also here to advise you and answer any question you might have on this matter.