What is the Australian Tax implication?

Question

I split with my wife some time ago and we are awaiting the courts to rubber stamp the property settlement. Meanwhile we sold our house and have a sum of funds sitting in a controlled monies account in trust for the two of us. The funds are earning interest credited into the trust each month and will still be there at the end of the 30 June 2008.

What are the tax implications on the interest that is being credited to the account? Will I have to include it as income in my personal income tax return for 07/08 and if so will I have to declare a 50% share even though I will only receive 40% of the interest per the property settlement? I am an Australian resident for tax.

I appreciate all answers but please only respond if you know the answer or have a link to a source that can give me the answer.

Answer 1

Hi Dave -

Questions:-

1. Did your accountant tell you that you need to include 50% of the interest - and there's no way around it? Or did someone tell you this?

2. Did you tell your accountant (both the partner as well as the slave accountant who actually does the work) that you are to receive only 40% of the property settlement? The slave accountant needs to know this. Maybe you told the partner and he/she failed to pass on the vital information to the slave accountant. (Or if there is no accountant who is dealing with it - ignore point 2)

3. Yes, generally an interest income in a joint account is assesed 50:50.

4. But, the interest income should really be assessed according to - who is actually entitled to the income. In your case - if you are only entitled to 40% of it - then 40%.

5. Go see your slave accountant and show this to him/her.

http://law.ato.gov.au/pdf/td1992-106.pdf

Hope the above helps!