Deductions for gifts are claimed by the person or organisation that makes the gift (the donor). A donor can be an individual, company, trust or other type of taxpayer.
The amount of the deduction depends on the type of gift. For gifts of money, it is the amount of the gift. For gifts of property, there are various valuation rules.
A deduction for a gift cannot add to, or create, a tax loss for the donor.
Dominic's assessable income in his tax return for 2006-07 is $15,000. He has donated $20,000 to a DGR during that year. He has no other income or deductions in his tax return.
The tax deduction he can claim for his gift is limited to $15,000. This is because a deductible gift cannot add to or create a tax loss.
Therefore, Dominic's taxable income becomes nil and the excess $5,000 from his gift cannot be carried forward to a later tax return as a tax loss.
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However, donors can elect to spread deductions for certain gifts over a period of up to five years.
Certain gifts may be apportioned over a period of up to five income years. Donors may elect to apportion their gift deduction over a maximum of five years where the gift is:
- $2 or more: money
- property > $5,000: property valued by the ATO at more than $5,000
- cultural gifts: property under the cultural gifts program, or
- heritage gifts: places listed in the National Heritage List, the Commonwealth Heritage List or the Register of the National Estate.
Approved forms for elections and variations vary depending on the gift and the deductible gift recipient (DGR) that receives it.
The election for environmental, heritage or cultural gifts must be sent to the relevant Department before lodging the first return to which it applies.
The 'election to spread deduction for a gift' is available in TaxPack for the following types of gifts:
- $2 or more: money
- property > $5,000: property valued by the ATO at more than $5,000.
Donors should fill in the 'election to spread deduction for a gift' and keep it with their records.
No. The price paid to attend a fundraising dinner (or similar function) conducted by a deductible gift recipient (DGR) is not a tax deductible gift.
The cost of a ticket to a fundraising dinner is not considered a gift. Whether or not the payment exceeds the market value of the meal or entertainment, a material benefit has been received in exchange for the purchase price of the ticket. No part of such payment can be treated as a donation or gift where the full amount must be paid in order to attend a function.
Notional splitting or apportionment of entrance fees into dinner components and gift components is not acceptable where the full fee must be paid in order to attend the function. The payment does not have the characteristics of a gift where the purchaser is obliged to pay the full fee in order to attend.
In certain circumstances, the cost of attending fundraising events such as fetes, balls, gala shows, dinners, performances or similar events can be considered a tax deductible contribution. More information can be found in the Tax deductible contributions chapter of Fundraising (NAT 13095).
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Testamentary gifts are gifts made under a deceased person's will. Generally, they are not deductible. The exception being gifts made under the cultural bequests program which was suspended at the end of the 1999-2000 income year. When the testator dies, there must be in force a certificate from the Minister for Communications, Information Technology and the Arts that approves the gift and specifies its value.
As a result of an amendment to the tax laws, from 1 July 2005, testamentary gifts of property of any value made to deductible gift recipients will be exempt from capital gains tax.
Certain gifts to deductible gift recipients are allowable deductions. For a gift to be tax deductible, it must be in the form of money ($2 or more) or certain types of property.
There is no deduction for a gift of a service, including a volunteer's time, as no money or property is transferred to the deductible gift recipient. Examples of amounts that are not deductible include a volunteer's expenses in carrying out voluntary work, and the value of unpaid work.
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 may be deductible as a gift if it falls within one of the gift types.
End of example
A volunteer may be entitled to claim expenses for items such as travel, or uniforms, to the extent they are incurred in gaining or producing assessable income, except where the outgoings are of capital, private or domestic nature.
Although deductible gift recipients (DGRs) are not required by tax law to issue receipts for tax deductible gifts, the issuing of receipts does help donors with the preparation of their tax returns and in case their claims are checked by the ATO.
If a DGR issues a receipt for a gift, it must include the following information:
- the name of the fund, authority or institution to which the gift has been made (an abbreviation will be acceptable where the full name of the fund cannot be shown on the receipt – the issuer of the receipt may need to publish the abbreviation somewhere, such as on its website, if the abbreviation does not readily identify the fund)
- the DGR's Australian business number (ABN) if it has one – not all DGRs have an ABN
- that the receipt is for a gift.
DGRs have the option to provide additional information for donors, including:
- the amount of money donated
- a description of the gift if it was property
- the date of the gift.
Where donors are not issued with receipts, other statements and records can be used to help in the preparation of their tax return.