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A friend of mine will be moving to Australia (on a PR). He would like to transfer his savings from abroad to me to hold, and then, I'll transfer it to him once he arrives and opens a bank account. I wanted to check whether this has any implications on me in terms of taxable income (other than the interest earned during the period). I am aware that he could open an account remotely before entering Australia but that's the fallback option.
If your friend transfers money to you here in Australia that you put into your bank account, the transfer itself has no tax consequences. I have assumed that the overseas friend does not owe you any money nor have you provided any services to them. As such, you are considered to be holding that money on trust for your friend. On that basis, the interest would treated as interest derived by the trust to which your friend is entitled. If I assume your friend is currently a non-resident for Australian tax purposes, they will be typically be liable to pay 'withholding tax on this amount' (normally at 10%). The bank would normally deduct this 10% at source but if the account is in your name, the bank will not know that a non-resident is entitled to the interest. The special rules that apply to interest derived by a non-resident mean your friend will not need to lodge a tax return to declare that interest but if no amount has been deducted at source by the bank, the 10% withholding tax still must be paid. Separate contact with the ATO will needed to organise this. This is perhaps something you as trustee of your friends money could organise at this end. Also, because you would typically be regarded as holidng that money on 'bare trust, a trust tax return would not need to be lodged.
Note that it would be a good idea for your friend to send you a letter detting out the arrangement so that you can show the ATO that the moeny and the interest is not really yours. Data matching will pick up the interest on your account but it won't match the amount of intetest you declared in your own tax return.
Hope this helps
I guessed as much that the interest would be considered as my income and I'd have to pay tax on that. This is acceptable as the duration I will be holding the money will be about a month if not lesser. The interest generated would be nominal at best so it's not worth the hassle of transferring the interest to my friend etc. I believe this is the easiest option with the least amount of paperwork involved.
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