DIRT & Fixed Term Deposit

I'm trying to advise a an aunt & uncle in relation to deposits but have come accross something I'm unsure of. They are over 65, have a lump sum to invest, and would qualify for DIRT exemption in the normal course. They want to put the money into a 4 year fixed account whereby the interest is paid out in year 4.

Could that interest put them into the tax net even though it has been accrued over the 4 years? The Revenue's wording is interest paid or credited - arguably the interest is only credited in year 4 and hence subject to the DIRT rate at the time. So if the interest paid pushes them over the limit in that year they are into the tax net. Can anyone point to a definitve answer on this?

Over-65s investing in a 4 year term deposit would seem a bit in-appropiate, unless they have other funds available

They have other funds available!

Even if they have other funds available, is it wise for a 65 year old to lock money away for 4 years until they are 69?

I would think that they are better considering other options.

The interest is liable to tax when it is received ie at the end the fourth year.

Have they considered investing in Irish Goverment Bonds - the interest is paid gross and they are probably as safe as a bank deposit

Fair point jpd, but would getting shorter term bonds be a problem? If interest rates go up the value of the bond goes down. I still feel 4 years is not an issue for a 65 years old - these days it's comparatively young. They have contingencies in case of ill-health etc.

Fairplay, you ask if the interest received at end of year 4 could put your relations above the Dirt exemption level, and the answer is yes it could. The interest is taxable income at the date of receipt.
The other thing to think about is that the higher tax-exemption level for over 65s is under notice. Two or three years ago at Budget time it was stated this higher exemption would be removed in 4 years. It has already been reduced.
In these times of uncertainty and mini-budgets, they should take their interest as soon as possible. Even with a one year deposit it could be wise to take the interest monthly.

Damn it CiaranT -your comments about the wisdom of 65year olds taking out four year deposit makes me think i should not have invested in thirty year govnt bonds which I'm planning to cash in for my 100th birthday cruise.

Well, you can sell your 30 yera Govt bond whenever you like - it's not a fixed term investment, although you may have to sell at a loss

No, I'll wait till my 100th to get the full benefit and thus go first class.

My 92 year old father keeps rolling over his Post Office Savings Bonds for a new 3 year period every time they mature. He has 4 different lots. Trying to get him to even consider doing something else with the money or to consider the tax implications of leaving behind his money is like talking to the wall.
The man scrimped and saved every penny throughout his life, denying himself and my mother simple pleasures such as having more than two radiators on in his house or having a cup of coffee and cake in a restaurant or having a decent holiday. Telling him that a huge portion of his estate will go in inheritance tax doesn't seem to sink in. He is going to do what he wants to do and it's such a pity.