Clarification on example 2 in SAIM2440

SAIM2440 sets out to clarify when interest on savings arises for tax purposes and so would be included on the tax return. Example 2 states that although the annual interest on a 5 yr bond is paid back into the bond, because the terms and conditions of the bond state that funds from the bond may be accessed with a penalty, the interest arises and is taxable yearly - i.e. the full amount of interest is not taken into account at the end of year 5. My question is - does this apply if the interest is paid into the bond annualy and the terms and conditions state that access to funds/interest from the bond is permitted in 'exceptional circumstances'.

Hi ,
 

If the terms and conditions of the of the bond allow access under any circumstance, even the most extreme exceptional circumstances, then the interest is taxed annually.  It is only if the terms and conditions do not allow access under any circumstance until maturity, that the interest would arise and be taxed at that point. Thank you