Private ruling: Gift
Published: May 2012
Ruling period: Year ending 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Will a gifted sum of money you receive from a relative be assessable income? | A1: No

Relevant facts and circumstances: A relative is to gift you a sum of money. The money is gifted to you to help you financially without any obligations. The amount you are to receive is uncertain. The payment you will receive will be made in a number of instalments. You will not provide any services or income-producing activities in return for the payment.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5

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. Taxation Ruling IT 2674 provides some general principles derived from relevant case law for determining when gifts are assessable income. 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. In your case, the money will be given to you as a gift to assist you financially. It will be paid for personal reasons without any connection to any income-producing activity on your part. The money that you receive will not be 'earned' as it will not directly relate to any services you will perform. The fact that you will receive it in a number of instalments is irrelevant. It is the motive of the donor and the character of the payment in the hands of the recipient that are the relevant factors. The amounts that you will receive are voluntary gifts of money to you. As such, the money will not be assessable income under section 6-5 of the ITAA 1997.

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