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Edited version of your private ruling
Authorisation Number: 1012610887248
Ruling
Subject: Gifts to family members
Question
Will you be liable for tax on money you gifted to your adult children?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2014
The scheme commences on
1 July 2013
Relevant facts and circumstances
You are a self-funded retiree.
You gifted money to each of your adult children.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 8-1
Reasons for decision
Assessability of gifts
A voluntary payment or gift which is properly characterised in the hands of the recipient as a product or incident of employment or a reward for services (including past services) is assessable income, even if paid by a third party. However, a voluntary payment or gift that is not related in any way to personal exertion will not be assessable.
The term 'gift' is not defined in the Income Tax Assessment Act 1997. The courts have described gifts as having the following characteristics:
• there is a transfer of money or property
• the transfer is made voluntarily
• the transfer arises by way of benefaction, and
• no material benefit or advantage is received by the donor.
Paragraph 32 of IT 2674 provides that, based on established case law:
(a) a personal gift received for personal reasons, without any connection with any income-producing activity on the part of the recipient is not assessable income for income tax purposes
(b) a gift or gratuity made only on grounds personal to the recipient is not assessable income
(c) if a gift is referable exclusively to the attitude of the donor personally to the [recipient] personally it is not assessable income, and
(d) a voluntary payment received from a family member, a friend or 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.
Therefore, where a gift is made for personal reasons and not as a result of any income-producing activity or provision of services, and is given voluntarily, the gift will not be assessable income. There are no tax implications for the recipient when a gift is made in these circumstances.
Deductibility of gifts
Gifts or donations of $2 or more to an eligible organisation are tax deductible. An eligible organisation is an organisation that is named in the tax legislation, or has been endorsed by the Tax Office as a deductible gift recipient, such as:
• certain organisations or charities which gave help in Australia
• an approved overseas aid fund
• a school building fund, or
• an approved environmental or cultural organisation.
The gifting of money to a family member for personal reasons is private in nature and is not tax deductible.
As such, there are no tax implications for you as a result of you gifting money to your adult children. No amount is included in your assessable income, and you are not entitled to any deductions.