Valuation expenses incurred by a donor are tax deductible if the valuation is made solely to determine the market value of a deductible gift so a gift deduction can be claimed.
The valuation expense is claimed in the tax return for the year when the expense is incurred. TaxPack explains how the expense can be claimed.
Other deductions
Advertising and sponsorship expenses that are not, in fact, gifts may be tax deductible if they are incurred in deriving assessable income.
Example
A company makes payments to a DGR to place its advertisements on the DGR’s premises.
The payments are not gifts. However, if they are incurred to promote the company’s business, they may be tax deductible.
Decline in value
If a donor gifts property on which a decline in value (formerly called depreciation) has been claimed as a tax deduction, there may be a consequential adjustment for income tax.
Such a balancing adjustment may either increase or decrease the donor’s taxable income.
For trading stock disposed of as a gift outside the ordinary course of business, the stock’s market value is normally included in the donor’s assessable income.
Capital gains
When property is gifted, there may be capital gains tax consequences.
Example
Conrad makes a deductible gift of property to a DGR. He bought it for $70,000 and its value at the time of the gift was $80,000. As the making of a gift can fall within the capital gains tax provisions, Conrad may have a capital gain of $10,000 with an amount being included in his taxable income (depending on his circumstances and ignoring the effect of indexation and other capital gains tax rules).
This could leave a deduction of $80,000 for the gift and an amount of capital gain included in his assessable income.
The following gifts of property are exempt from capital gains tax:
testamentary gifts (that is, gifts made under a will)
‘cultural gifts’, and
‘cultural bequests’.
Many personal use assets are also exempt.
Before 1 July 2005 a testamentary gift was exempt from capital gains tax only if the gift would have been tax deductible if it had not been a testamentary gift.
Deductions for contributions made at DGR fundraising events, political contributions and gifts, and tax concessions for conservation covenants are explained in Contributions and conservation covenants.
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