Edited version of your written advice

Authorisation Number: 1012674359010

Ruling

Subject: Charity contributions administered by a minister of religion

Questions and Answers:

1. Are the donations placed into your personal Australian bank account, that are wholly transferred to an unrelated overseas account for charitable purposes, assessable to you?

No.

2. Is interest earned in the above mentioned Australian bank account assessable to you?

Yes.

This ruling applies for the following periods:

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You are a minister of religion that collects donations for an overseas charitable purpose. The donations are placed in your personal bank account and then transferred to the trust account of the overseas charity project.

None of the donations you collect are used to pay for your personal services or any related expenses you may incur. The total of the donations collected are transferred to the charity project for the project's use. You receive no remuneration or expense reimbursements from the overseas charity.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Subsection 6-5(2) of the 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 has generally been held to include three categories, namely, income from rendering personal service, income from property and income from carrying on a business. In many instances there can be no dispute as to the character of a receipt, for example salary, wages and interest receipts are clearly ordinary income. Interest receipts are income from property.

For example, Taxation Ruling IT 2674 Income tax: gifts to missionaries, ministers of religion and other church workers - are the gifts income? states:

Whether a gift is assessable income depends on the quality or the character of the gift in the hands of the recipient.

If a church worker receives a gift because of, in respect of, for, or in relation to any income-producing activity of the church worker, the gift is assessable income. The income-producing activity can arise from the church worker's office or occupation or some service rendered or to be rendered by the church worker.

James is a missionary with Suburban Church. Because of particular interest in his work, supporters (including other churches of the same and different denominations) send him gifts. The gifts are of money which the donors require James to earmark to acquire capital assets. The assets are to be owned by James, rather than by his missionary society. They are to be used in James' missionary work and for his private purposes as occasion demands (both uses being of a substantial nature). These gifts are assessable income. James should include them in his tax return for the year of income in which they are received.

In respect to volunteers, the Tax Office publication Volunteers and tax (NAT 4612-04.2008) states a payment that is not assessable will have many of the following characteristics:

• The payment is to meet incurred or anticipated expenses.

• The payment has no connection to the recipient's income-producing activities or services.

• The payment is not received as remuneration or as a consequence of employment.

• The payment is not relied upon or expected by the recipient for day-to-day living.

• The payment is not legally required or expected.

• There is no obligation on the part of the payer to make the payment.

• The payment is a token amount compared to the services provided or expenses incurred by the recipient. Whether the payment is token depends on the full facts surrounding the payment and recipient's circumstances.

In your case, the donations you receive in your personal bank account and transfer wholly for the beneficial use of an unrelated party (who also do not provide you with any remuneration for your personal services) is not your assessable income. Instead, you are merely acting as an agent for the transfer of funds from donation givers to their intended beneficiaries.

However, because the Australian bank account used is in your personal name, you are assessable on the interest income received, according to ordinary concepts. The interest income cannot be treated in the same way some payments to bona fide volunteers are treated since you are not volunteering your services to the relevant Australian bank.