Farmers and small business operators whose homes and properties are owned by a business or trust cannot receive donated money from the bushfire fund. This is because the fund is prevented from donating to a corporate or other commercial entity because it may be stripped of its charitable status, legal advice obtained by the Victorian Liberal Nationals Coalition found.

Ryan has urged Prime Minister Kevin Rudd to call on the Australian Taxation Office (ATO) to make an immediate private ruling.

"If the ATO will not make a private ruling, the Prime Minister must then legislate to fix the impasse," he said.

"Australia's tax law on charitable purposes relies on a 400-year-old British ruling, even though the United Kingdom has since reformed its laws to provide a more expansive definition of the term 'charitable purpose'."