Shares valued at $5,000 or less
A donor may be able to get a tax deduction if they donate listed shares valued at $5,000 or less and they acquired the shares 12 months or more before they donated them.
To meet the requirements of this gift type your donor has to meet all of the following conditions:
- The shares are in a listed public company.
- When they donated the shares, they were listed for quotation on the official list of an approved Australian stock exchange.
- They acquired the shares 12 months or more before donating them.
- The market value of the shares was $5,000 or less on the day they donated them.
A share in a company refers to a share in the capital of the company. Securities that are not shares, including derivatives of shares, are not included in this gift type.
Example 1 – Shares in a private company
Mei purchased shares in a private company for $400 two years ago. Mei will not be able to receive a tax deduction for any gift of those shares as they are not in a listed public company.
Example 2 – Shares suspended from trading
Michael donated a parcel of shares to a DGR. On the day that Michael donated the shares, the shares were suspended from trading. Michael cannot claim a tax deduction for the market value of the shares, as the shares were not listed on an approved stock exchange at the time he made the donation.
End of example
Your donors need to consider the following points:
- They can acquire the shares through a variety of means, including shares they
- received as a gift
- received as a bonus.
- The shares must be listed at the time they donate them. 'Listed shares' are shares in a public company that are listed for quotation in the official list of a stock exchange that is listed under the heading 'Australia' in the list of approved stock exchangesExternal Link in the income tax regulations.
- Shares that are suspended from trading are not listed for quotation; therefore, they cannot claim a deduction for them.
- Shares in different companies donated at the same time are treated as separate donations.
- To be tax deductible, their gift must be made to a DGR.
- They can use the gift type that is most appropriate for the gift – gifts of shares may also meet the requirements of the following gift types
- property purchased during the 12 months before making the gift
- property valued by us at more than $5,000
- trading stock disposed outside of the ordinary course of your business.
- The gift deduction they can claim is the market value of the shares, if that value is more than $2 but not more than $5,000 (the deduction must not add to or create a tax loss). The market value is the value of the shares as listed on an approved stock exchange.
- They can only claim a tax deduction for a gift of shares in the income year you donated them.
- If the gift includes both shares they acquired more than 12 months ago and shares they purchased in the last 12 months, the amount they can deduct will depend on the gift type they are claiming under.
- For shares acquired more than 12 months ago the amount they can deduct is the market value of the shares (under the shares valued $5,000 or less gift type).
- For shares acquired in the last 12 months, they can claim a deduction (under the property purchased during the 12 months before making the gift deductible gift type) for the lesser of either the
- market value of the shares on the day they donated them
- amount they paid for the shares.
- There are other income tax consequences of making a gift to a DGR that they may need to consider, including
- record keeping
- tax losses
- deductions for jointly-owned property
- deductions for valuation expenses
- decline in value for gifts of depreciating assets
- capital gains tax (CGT) consequences.
If a donor makes a gift of listed shares valued at $5,000 or less within 12 months of acquiring them, they may be able to claim a tax deduction.
Example 1 – Gifting two parcels of shares
Tim wants to donate $3,000 of shares in Red Ltd and $4,000 of shares in Blue Ltd, both listed public companies, to a DGR. He purchased both of these parcels of shares more than 12 months ago. Tim signs and submits two share ownership transfer forms.
Although their combined value is more than $5,000, Tim can still claim a deduction for the donation of the shares under this gift type as they are treated as separate gifts each valued at $5,000 or less.
Example 2 – Holding shares for more than 12 months
Fiona purchased a parcel of 100 shares in an Australian-listed public company on 5 August 2004. On 15 January 2014, Fiona donated the parcel of shares to a DGR. The market value of the shares on 15 January 2014, as listed on the approved stock exchange, was $4.50 per share.
Fiona has donated shares in an Australian-listed public company that she purchased more than 12 months before donating them. Fiona can claim a deduction of $450 (that is, the market value of the shares on the day she donated them to the DGR) for the $450 in the income tax year ended 30 June 2014.
Example 3 – Donating shares held for different periods
Steven holds shares in a listed public company. He has held these shares for more than 12 months. Under a dividend reinvestment scheme, Steven purchased a further $480 in shares in the company.
Steven donates all his shares in the company to a DGR within 12 months of purchasing the shares with the dividend. At the time the shares held for more than 12 months were valued at $4,000 and the shares purchased with the dividend were valued at $500.
If the deduction does not add to or create a tax loss, Steven can claim a tax deduction of $4,480, being:
End of example
- $4,000 for the shares held for more than 12 months
- $480 for the shares he purchased in the last 12 months.