Private ruling: Assessable income
Published: August 2013
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2012

Ruling: Q1: Are the amounts you receive included in your assessable income? | A1: No.

Relevant facts and circumstances: Your relative has a medical condition that requires significant medical expenses including regular payments for various therapies. You previously worked for an employer. Since ceasing your work with the employer you have severed all connections and there is no expectation on your part or your former employer that you will return to work for your former employer at any time in the future. Although you did not ask or expect any payment from your former employer in relation to your relative's condition, your former employer offered to help you cover your relative's medical expenses without solicitation. Your former employer's offer was not described or understood by ether party as payment for your services or as a supplement to or incident of those services.

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 an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Taxation Ruling TR 2005/13 provides principles relevant to the determination of whether a transfer of money or property constitutes a gift. The term 'gift' is not defined in the ITAA 1997. Therefore, the word 'gift' takes its ordinary meaning. 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. Taxation Ruling IT 2674 examines whether gifts or voluntary payments received by church workers are assessable income. These principles are no different from those which apply in determining whether gifts received by taxpayers in other callings or occupations are assessable income. Whether a gift is assessable income depends on the character of the gift in the hands of the recipient. Consideration is necessary of the whole of the circumstances in which the gift is received. For example, the following factors need to be taken into account: · How, in what capacity, and for what reason the recipient received the gift; and · Whether the gift is of a kind which is a common incident of the recipient's calling or occupation; and · Whether the gift is made voluntarily; and · Whether the gift is solicited; and · If the gift can be traced to gratitude engendered by some service rendered by the recipient to the donor, whether the recipient had already been remunerated fully for that service; and · The motive of the donor (but it is seldom, if ever, decisive); and · Whether the recipient relies on the gift for regular maintenance of himself or herself and any dependants. A personal gift received by you for personal reasons, where there is no connection between the receipt of the gift and any income-producing activity by you, is not assessable income. Nor is a gift assessable income if it is referable exclusively to the attitude of the donor personally to you. In your situation, you receive payments from a former employer to help pay your relative's medical expenses. It is accepted that the payment was not for any other use than to help offset your relative's medical expenses. It is also accepted that the donor was motivated by a desire to assist you with your relative's condition. Therefore the gifts received are not regarded as assessable income.