Making tax deductible gifts and contributions

Gifts

Gifts have all the following characteristics:

• there is a transfer of money or property
• the transfer is made voluntarily
• the transfer arises by way of benefaction
• no material benefit or advantage is received by the donor.

Not all payments you make to DGRs are gifts.

Example: Not a gift

Sally buys a clock at a charity auction. This is not a gift, even if Sally has paid a lot more than the value of the clock.

Examples: Not gifts

• Purchases of raffle or art union tickets
• Purchases of chocolates, pens and similar low cost items
• The cost of attending fundraising dinners, even if the cost exceeds the value of the dinner
• Membership fees
• Payments to school building funds as an alternative to an increase in school fees
• Payments if you have an understanding with the recipient that the payments will be used to provide a benefit to you

Example: Gift and not a gift

William attends a Christmas concert. He buys his admission ticket for $10. On the night, he also makes a voluntary donation of $70. The $70 is a gift but the $10 for the ticket is not a gift.

To be a gift, there must be a transfer of money or property.

Example: Not a gift

As part of a telethon, Theodora calls to pledge $500 to a DGR. However, she then forgets about it and never actually donates the money to the DGR. Theodora has not donated a gift, as she has not transferred the $500 to the DGR.

You cannot claim a deduction for the gift of a service, as no money or property is transferred to the DGR. If you volunteer for a DGR, expenses you incur in carrying out the voluntary work and the value of your unpaid work are not deductible as a gift to a DGR.

Example: Not gifts

Alessandra does volunteer work for a DGR caring for sick children. She buys toys and gives them to the children. Alessandra can not claim a deduction because she has not donated property to the DGR itself.

If you transfer property to a DGR as part of providing a service, you may be able to claim a deduction for the property. The property has to be actually transferred to the DGR.

Example: Gift and not a gift

John offers to repair a timber fence around a DGR's premises and supply the timber for the job. John's car expenses to collect the timber are not deductible as a gift. They are part of supplying the service. However, the timber (which becomes the property of the DGR) may be deductible as a gift if it meets the requirements of one of the gift types.

If the DGR provides you with an acknowledgment in appreciation of a payment you made, your payment may still be a gift.

Example: Gift

Clare receives a lapel badge for her donation to a DGR. This is not a material benefit so the donation is a gift.

Other acceptable forms of acknowledgment include:

• stickers
• mention in a newsletter or periodical
• plaques, if they are of small cost and prominence.

However, larger acknowledgments in the form of advertising may prevent your payment from being a gift. Advertising and sponsorship expenses that are not, in fact, gifts may be tax deductible if incurred in deriving assessable income.

If an organisation is conducting an appeal for more than one purpose (and not all of the purposes are for the benefit of DGRs), you must pledge the extent your gifts are to be applied to a DGR.

You make a pledge in writing (for example, on the contribution envelope or a pledge form) to the fundraising body, specifying the name of the DGR and the amount or percentage of the total to be applied to the DGR. You can then claim a deduction for the amount of the actual gift you donated to the DGR.

Alternatively, the terms of the appeal may state the proportion to be applied to the DGR. You can claim a deduction for that proportion of the gift.

You cannot claim a gift deduction if you enter into an arrangement for donating a gift and any of the following apply:

• the value of the gift to the DGR is, or would be expected to be, less than the value of the gift at the time it was donated
• any other organisation makes, or may reasonably be expected to make, payments to other people for the gift
• you or your associate obtains, or would be expecting to obtain, any benefit other than the benefit of a tax saving
• the DGR or another fund, authority or institution is to acquire property from you or your associate.

For more information about the requirements for gifts, refer to Taxation Ruling TR 2005/13 Income tax: tax deductible gifts - what is a gift.