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Edited version of private ruling
Authorisation Number: 1011821888356
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Ruling
Subject: Assessability of gift of money
Question and answer:
Will you be assessable on a gift of money you receive from a family member?
No.
This ruling applies for the following periods:
Year ending 30 June 2011
Year ending 30 June 2012
The scheme commenced on:
1 July 2010
Relevant facts:
A family member sold some property in an overseas country.
This family member would like to give you all the proceeds from the sale as a gift.
You will not provide any services or income-producing activities in return for the payment.
Your family member is giving you the money to assist you to pay off your mortgage.
In the overseas country, there are restrictions on the movement of money.
Your family member will ask family and friends in the overseas country to send portions of the total amount to you.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 6-10
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
Section 6-10 of the ITAA 1997 provides that amounts that are not ordinary income may be included in assessable income under another provision as statutory income.
Taxation Ruling IT 2674 Income tax: gifts to missionaries, ministers of religion and other church workers - are the gifts income? deals specifically with whether gifts received by church workers are assessable; however, from this ruling some general principles for determining whether gifts are considered to be assessable income can be established. Paragraph 32 of IT 2674 states:
· a personal gift received for personal reasons without any connection to any income-producing activity on the part of the recipient is not assessable income for income tax purposes,
· a gift or gratuity made only on grounds personal to the recipient is not assessable income,
· if a gift is referable exclusively to the attitude of the donor personally it is not assessable income, and
· a voluntary payment received from a family member, a friend or an acquaintance, or a fellow worker is prima facie received on grounds personal to the recipient, or to assist his or her personal needs if nothing more than this appears from a consideration of the whole circumstances of the case, the payment is not assessable income.
All of the above principles are derived from relevant case law.
In your case, the money will be given to you as a gift to assist you to pay off your mortgage. It will be paid for personal reasons without any connection with any income-producing activity on your part. The money that you receive will not be 'earned' as it will not directly relate to any services you will perform.
The fact that you will receive the money in multiple parts via various relatives or friends is irrelevant. It is the motive of the donor and the character of the payment in the hands of the recipient that are the relevant factors. Therefore, the amounts that you will receive are all voluntary gifts of money to you. As such, the money will not be assessable income for income tax purposes.
In conclusion, the money that you will receive as a gift from a family member will not need to be included in your assessable income and will not need to be declared in your income tax return.
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