Private ruling: Income tax exemption
Date of advice: 29 November 2024
Published: 13 January 2025
Ruling period: DD MM YY to DD MM YY
Date scheme commenced: DD MM YY

Ruling: Q1: Will the funds raised for medical treatment be assessable under 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) ? | A1: No. The trust was established to hold and distribute funds for an individual's medical treatment. These amounts are not regular, relied upon or in the furtherance of a business. Therefore, as the trust activities have no element of gain, profit or commerciality the funds will not be assessable as ordinary income under 6-5 of the ITAA 1997.

Relevant facts and circumstances: The patient was an ex-employee of the family and became unwell in YYYY. The patient's type of medical condition could only be treated with medical therapy and there were no treatment facilities in the overseas country. The trustee completed research and found potential treatments in Australia with total cost of $XXXX. The funds for the treatment were primarily fundraised through a web platform and the trustee's children raising funds in the community. The trustee wished to hold the funds on trust to be transparent and to ensure donors felt reassured their money was well accounted for. On DD MM YY, the trustee established the trust, the discretionary trust deed disclosed the following information: • The principal purpose of the trust is to enable medical treatment in Australia for the patient. • The funds of the trust may also be used to meet travel and accommodation costs incurred by the patient in relation to their medical treatment. • Following completion of the medical treatment any residual funds are to be paid to the patient or their family at the discretion of the trustee. • With the signing of the trust deed, the trustee agreed to become the trustee of the trust. • The patient was named the primary beneficiary of the trust. The patient visited Australia last year for treatment and the trustee continues to transfer money to the patient in overseas to pay for associated medical costs. The trustee has not received any funds throughout the process and remaining funds will not be distributed to the trustee. Once remaining funds are used the discretionary trust and bank account will be closed.

Relevant legislative provisions: Income Tax Assessment Act 1997 section6-5