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Edited version of your written advice
Authorisation Number: 1012853076396
Date of advice: 3 August 2015
Ruling
Subject: Is a monetary gift assessable?
Question and answer
Is the money you receive as a gift from your parent's assessable income?
No.
This ruling applies for the following periods:
Year ending 30 June 2016
The scheme commenced on:
1 July 2015
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You are a resident of Australia for taxation purposes.
You are receiving a gift of money from your parents
The gift will be a once off lump sum payment.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Subsection 6-5(2)
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, whether in or out of Australia, during the income year
A gift will be assessable income if it is:
• Income in the ordinary sense of the word (ordinary income), or
• the provisions of the tax law include it as assessable income (statutory income).
Under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997), ordinary income means income 'according to ordinary concepts'.
Generally, a gift is regarded as a personal windfall gain and not as ordinary income unless the taxpayer has received the gift because of, in respect of, or in relation to any income-producing activity of the taxpayer.
In determining whether a gift is ordinary income, the courts have established that consideration of the whole of the circumstances is necessary and that the following factors need to be taken into account:
• how, in what capacity, and for what reason the recipient received the gift
• whether the gift is of a kind which is a common incident of the recipient's calling or occupation
• whether the gift is made voluntarily
• whether the gift is solicited
• whether the gift can be traced to gratitude engendered by some service rendered by the recipient to the gift donor
• the motive of the gift donor (though this factor is rarely decisive in itself), and
• whether the recipient relies on the gift for regular maintenance of themselves and any dependents.
Under section 6-10 of the ITAA 1997 assessable income also includes statutory income. Statutory income is amounts that are not ordinary income but are included as assessable income by provisions of the tax law.
Subsection 15-2(1) of the ITAA 1997 provides that the value to the taxpayer of all gratuities and benefits given or granted to them in respect to, or for, or in relation directly, or indirectly to, any employment will be included in their assessable income
There must be a connection between the payment and the employment. The receipt must be a product of the employment.
In your case you will receive a once off lump sum payment from your parents.
This gift does not relate to your employment and you are not relying on the gift for the maintenance of your dependents or yourself
The gift is therefore not subject to tax.
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