Edited version of your private ruling

Authorisation Number: 1012041733731

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. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: Assessable income - gifts

Question

Will the money you receive from your family member be assessable income?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 2012

Year ending 30 June 2013

The scheme commenced on:

1 July 2011

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.

Your family member would like to give you some money.

The amount will be paid in two or three instalments over the next year.

Your family member has advised that this money would have otherwise been bequeathed to you in their will.

The payment is voluntary and your family member requires nothing in return.

You will not provide any services or income producing activities in return.

Relevant legislative provisions

Income Tax Assessment Act Section 6-5.

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.

Ordinary income is income according to ordinary concepts. Ordinary income has generally been held to include three categories, namely, income from rendering personal services, income from property and income from carrying on a business.

Taxation Ruling IT 2674 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

§ 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. 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 payments 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. Accordingly, the money will not be assessable income under section 6-5 of the ITAA 1997.