If you purchase property and within 12 months donate it to a deductible gift recipient (DGR), you may be able to claim a tax deduction.
To be tax deductible under this gift type:
- you must donate the property within 12 months of purchasing it
- the value of the gift must be $2 or more.
However, if you purchase property more than 12 months before making the gift it may still be tax deductible under another gift type.
Example 1 – Property purchased more than 12 months before donation
Isabelle purchased a car in December 2015 for $15,000. She donated it to a DGR in January 2017. She is not eligible for a deduction under this gift type, as she purchased the car more than 12 months before donating it. However, she may be able to claim a deduction under another gift type, for example, Property we value at more than $5,000.End of example
What is property?
Property has a wide meaning, it is more than just physical things (such as land and objects). It includes rights and interests that can be owned and have a value (such as shares and ownership rights).
Property that was not purchased
Property is purchased if it is acquired by way of sale for money or some other form of payment. Property that has not been purchased includes prizes won in raffles, property received as a gift and inherited property. Property that has not been purchased is not tax deductible under this gift type.
Example 2 – Donating a raffle winning
Giulia wins a desk in a raffle. If she donates the desk to a DGR, the gift will not meet the requirements of this gift type (as she did not purchase it). She could check if it was covered by another gift type that applied to the DGR.End of example
How much can I claim?
The tax deduction you can claim is the lesser amount of either the:
- market value of the property on the day the gift is donated
- amount you paid for the property.
It is up you, not the DGR, to find out the market value of the gift.
If you are not registered for GST (and not required to be) you do not need to adjust the market value.
If you are registered for GST (or required to be registered) the market value is reduced by the amount of GST credit you would have been entitled to if:
- you had purchased the property at the time you made the gift
- the purchase had been only for a purpose that GST credits would apply to.
Example 3 – Donations that cost more than the market value
Clarence purchases a computer for $1,800 and donates it to a DGR 10 months later. The market value of the computer at the time Clarence made the gift is $1,200.
Clarence cannot claim $1,800 because the market value is less than the amount he paid. He can only claim $1,200.End of example
Example 4 – Reducing the market value by the amount of GST credit
Fran runs a restaurant and is registered for GST. She donates some of the restaurant's kitchenware to a DGR on 7 November 2014. Its market value on that day (including GST) was $2,200.
If she had purchased the kitchenware for $2,200 on that day for use only in the restaurant, she would have been entitled to a GST credit of 1/11th of the cost. Therefore, she would have been able to claim back $200 of GST on the purchase.
As a result, the market value of the kitchenware for gift deduction purposes would be $2,000 (that is, $2,200 minus $200).
If Fran was not registered for GST and was not required to be registered, the market value would be $2,200.End of example
See also:If a donor makes a gift of property within 12 months of purchasing it, they may be able to claim a tax deduction.