Private ruling: Taxation of a gift of cash
Published: June 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Will you be assessable on a gift of money you receive from a person? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-10 | Income Tax Assessment Act 1997 Section 15-2

Reasons for decision: Summary: 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. Section 6-10 of the ITAA 1997 provides that amounts that are not ordinary income may be included in assessable income under another provision as statutory income. Taxation Ruling IT 2674 Income tax: gifts to missionaries, ministers of religion and other church workers - are the gifts income? 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, and • 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 was given to you as a gift to assist you to pursue your hobby which was a passion of yours. It was paid for personal reasons without any connection with any income-producing activity on your part. The money that you received was not 'earned' as it was not directly related to any services you may perform. The amount that you received was a voluntary gift of money to you. As such, the money is not ordinary income. Also, although you received the money from a previous employer, it is accepted that in your case the payment was not in relation to any employment or services rendered by you and therefore is not assessable as statutory income under section 15-2 of the ITAA 1997. In summary, the money is not included in your assessable income and is not required to be declared in an income tax return.

Relevant facts: You received a gift of money from a person who was a former employer of yours. | It was not given for services rendered or for future expectation of services to be provided. | It was given to you to assist you to pursue a hobby of yours that was your passion. | The person did not claim for the money given to you as a deductible business expense. It was treated as their personal expense.