Private ruling: Income - gift
Published: February 2012
Ruling period: Year ending 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Will the periodic gift of money from your relative be assessable? | A1: No.

Relevant facts and circumstances: Your relative wants to purchase an asset for you and your spouse as a gift. You intend to purchase the asset in you or your spouse's name and pay for it yourself. Your relative will reimburse you by depositing money into your account each month until the cost of the asset is covered.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2).

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 provides that the assessable income of a taxpayer includes income according to ordinary concepts (ordinary income). 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. Other characteristics of income that have evolved from case law include receipts that: § are earned, § are expected, § are relied upon, and § have an element of periodicity, recurrence or regularity. Generally, a gift is regarded as a personal windfall gain or as the result of a domestic or personal arrangement and not as ordinary income unless you have received the money because of, in respect of, or in relation to any income-producing activity of yours. Taxation Ruling TR 2005/13 provides principles relevant to the determination of whether a transfer of money or property constitutes a gift. This ruling highlights that rather than attempting to define a 'gift', the courts have described a gift as having the following characteristics and features: § there is a transfer of the beneficial interest in property, § the transfer is made voluntarily, § the transfer arises by way of benefaction, and § no material benefit or advantage is received by the giver by way of return. In your case, you will be receiving monthly payments from your relative until the cost of the asset is covered. Although these payments are going to be regular they will be made to you voluntarily and not as a result of any services performed. Therefore the money that you will receive from your relative is considered to be a gift and will not be included in your assessable income.

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