Edited version of private ruling

Authorisation Number: 1011821949883

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Assessability of gift

Questions and answers:

Is a gift of money to you assessable income?

No.

This ruling applies for the following period:

Year ended 30 June 2011.

Year ended 30 June 2012.

The scheme commenced on: 1 July 2010.

Relevant facts:

You and your spouse recently separated.

You and your spouse are seeking a court order for the separation of an asset.

You received inheritance over several years, which you used in full towards an asset.

You believe that under Australian law, a consent order would likely result in a more or less even distribution of this amount to you and your spouse, even if your spouse agrees that you should receive back the full inheritance.

You and your spouse intend to agree to a 50/50 spilt of the inheritance in your application to the courts.

After the court order has been issued, you and your spouse have an agreement outside the court order, for your spouse to make a monetary gift to you in one lump sum.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Subsection 6-5(2).

Income Tax Assessment Act 1997 Section 6-5.

Income Tax Assessment Act 1997 Section 6-10.

Income Tax Assessment Act 1997 Section 10-5.

Reasons for decision

Assessable income

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.

There are a number of factors which can assist in determining whether a particular receipt is ordinary income. These include:

· whether the payment has resulted from employment, services rendered, or a business,

· whether it is received as a lump sum or regularly and periodically,

· whether the amounts are depended on, and

· the motive of the person making the payment for example, voluntarily or seeking an advantage.

The courts have also agreed that where the recipient and giver are on personal terms, a payment is more likely to be considered a gift rather than ordinary income.

Section 6-10 of the ITAA 1997 provides that your assessable income includes statutory income amounts that are not ordinary income but are included as assessable income by another provision.

Section 10-5 of the ITAA 1997 lists provisions about statutory income. The gift of money you will receive is not covered in any of the provisions listed in section 10-5 of the ITAA 1997 and is therefore not statutory income.

Conclusion

Based on your intentions with your spouse, the amount to be given to you is not assessable income as;

· the transfer is based on personal terms rather than seeking some advantage,

· the payment is a once off lump sum,

· there is no connection between any employment or services rendered by the taxpayer and the payment made,

· you are not relying on the payment for regular expenditure,

The payment is not assessable under section 6-5 of the ITAA 1997 as it is not ordinary income, nor is it assessable under section 6-10 of the ITAA 1997 as it is not statutory income.

Accordingly the amount is not assessable income to you in the 2011or 2012 income years.