House of Representatives

Tax Laws Amendment (2004 Measures No. 1) Bill 2004

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 7 - Deductions for contributions relating to fund-raising events

Outline of chapter

7.1 Schedule 7 to this bill inserts items 7 and 8 to the table in section 30-15 and amends sections 30-212, 30-315, 30-228, 995-1 and subsection 30-125(4) of the ITAA 1997. The amendments provide a tax deduction to eligible contributions to deductible gift recipients (DGRs), where an associated minor benefit is received.

7.2 This Schedule also amends subsection 6(1) (items 11 and 12 in the Schedule) of the ITAA 1936.

Context of amendments

7.3 Concerns were raised with the Government through the Prime Minister's Community Business Partnership (CBP) that fund-raising difficulties were being caused by the current tax law. In response to those concerns, the Government decided from 1 July 2004, to allow deductions for contributions of certain cash and property to DGRs, where a minor benefit is received in return.

7.4 The Report of the Contemporary Visual Arts and Craft Inquiry (Myer Report) also recommended inter alia that the tax law should be amended "to clearly state that an advantage or benefit received by donors does not prevent their ability to receive a tax deduction, provided the benefit does not exceed a specified limit" (Recommendation 20.6, p.342).

7.5 Currently, only those transfers to DGRs that are categorised as gifts give rise to personal deductions under Division 30 of the ITAA 1997. The meaning of 'gift' has been defined by the courts to include the following essential characteristics:

·
the property must be transferred voluntarily and not as a result of contractual obligation to transfer it;
·
no material advantage must be received by the transferor in return; and
·
a gift should be motivated by 'detached and disinterested' generosity with the aim of conferring benefaction on the recipient.

7.6 Section 78A of the ITAA 1936 provides that a deduction is not allowable under Division 30 of the ITAA 1997, if the gift is made under an arrangement whereby the true value of the gift does not equal the amount or value claimed as a deduction. That is, a deduction will be denied where inter alia, the donor receives a collateral benefit in connection with the gift (ATO Tax Ruling IT 2443).

7.7 The amendment is designed to encourage philanthropy by ameliorating some existing impediments to fund-raising by DGRs, identified by the Myer Report and the CBP.

7.8 A deduction under this amendment will be in addition to the deductions currently allowed for gifts. To differentiate from a gift, the term 'contribution' is used.

Summary of new law

7.9 The amendments will allow an individual to receive a deduction for eligible contributions to DGRs where the value of the contributions is more than $250, and the minor benefit received in return is no more than $100 or 10% of the value of the contribution, whichever is the less.

7.10 The amendment applies to contributions of money and property. Where the contribution is property, it must be valued at more than $250 and either purchased within 12 months of making the contribution; or owned by the contributor and valued by the Commissioner at more than $5,000.

7.11 The deductions are limited to individuals and cannot be claimed by companies using the fund-raising events of DGRs to entertain clients. Companies may be able to claim their contributions as an ordinary business deduction.

7.12 The deduction is limited to that part of the contribution that is in excess of the minor benefit received by the contributor. The DGR organising the fund-raising event will be responsible for both determining the market value of the minor benefit and, if issuing a receipt to the contributor, to indicate the total amount of the contribution, the value of the minor benefit and the deductible amount. For example, if the total amount of contribution made is $300, and the minor benefit received is $30, $270 would be the deductible amount.

7.13 The amendment applies to specific one-off fundraising 'events', which may include both attendance at charitable events or sale of goods and services at charitable auctions.

Comparison of key features of new law and current law
New law Current law
From 1 July 2004, a deduction will be allowed where the donor receives a benefit in connection with the contribution, provided that certain conditions are met and the benefit does not exceed a specified limit. Section 78A of the ITAA 1936 provides that a deduction will be denied where the donor receives a benefit in connection with the donation.

Detailed explanation of new law

7.14 This amendment applies to contributions made to a fund, authority or institution covered by an item in any of the tables in Subdivision 30-B of Division 30 of the ITAA 1997 or to public funds or prescribed private funds as covered in item 2 of Subdivision 30-A of Division 30 of the ITAA 1997. [Schedule 7, item 1]

7.15 This amendment applies to contributions made to a DGR and does not include political parties. Fund-raising events held by political parties are ineligible for a deduction under this amendment. (Prime Minister's Press Release of 9 September 2003.)

What kinds of contributions are eligible for income tax deduction?

7.16 Subject to certain conditions, this amendment allows deductions to be made for two separate types of contributions at a DGR fund-raising event in Australia:

·
contributions made in return for a right to participate in a fund-raising event (e.g. the purchase of a ticket to attend a charity ball, fete, dinner, performance or similar charitable fund-raising event); and
·
contributions made by way of consideration for the supply of goods and services for successful bidding at a charity auction that is conducted by a DGR.

[Schedule 7, item 2]

Cash and property over $250

7.17 The amendment provides an income tax deduction for contributions of cash and property over $250, where a minor benefit of no more than the lesser of $100 or 10% of the value of the contribution is received by the contributor in return.

7.18 The amendment applies to contributions of property valued at more than $250 and purchased during the 12 months before the contribution. For property owned more than 12 months before the contribution, the property must be greater than $5,000 and valued by the Commissioner. [Schedule 7, item 2]

7.19 The value of a contribution of property is assessed as on the day the contribution is made. The value of a contribution of property purchased during the 12 months before the contribution is the lesser of the market value of the property on the day that the contribution was made and the amount the contributor paid for the property. The value of property owned by the contributor and valued at more than $5,000 by the Commissioner is the value as determined by the Commissioner. [Schedule 7, item 2]

Eligible fund-raising events

7.20 The amendment applies to one-off fund-raising 'events' conducted in Australia and not to on-going fund-raising efforts. Events that form part of "a series or periodic, like or similar events" (subsection 40-165(4)) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), such as membership subscriptions, or the provision of newsletters in return for a subscription are excluded.

7.21 An eligible fund-raising event has the same meaning given in section 40-165 of the GST Act, except for subparagraph 40-165(1)(b)(i) of that Act. [Schedule 7, items 2 and 10]

What is deductible in respect of a contribution?

7.22 The amendment allows a deduction for the amount of the contribution less the 'GST inclusive market value' of the minor benefit received by the contributor in return for the contribution. The deduction is only allowed if the benefit received in return for making a contribution, is both nominally and relatively minor - that is, the maximum allowable benefit must not exceed $100 or 10% of the contribution, whichever is the less.

Example 7.1 Maria pays $260 to attend a charity golf game, hosted by a DGR. The market value of an 18-hole golf game is $20. Maria can claim $240 ($260 less $20) as the market value is less than $100 and 10% of the value of her contribution.

Example 7.2 Karen pays $260 for a ticket to a charity film screening organised by a DGR. The film is open to the public and ordinarily retails for $13 a ticket. As part of the charity screening, Karen is offered a glass of champagne and some finger food. The market value of the event is $25. Karen can claim a deduction for $235 ($260 less $25).

Example 7.3 Roberto buys a ticket to a gala performance organised by a DGR, for $400. The gala performance has a ticket price on the open market of $100. Roberto cannot claim any deduction as the market value of the performance - which is the benefit ($100) he receives in return for his contribution of $400 - is greater than 10% of the value of his contribution ($40), even though it is not greater than $100.

Example 7.4 Franca pays $1,300 to attend a gala dinner to mark the opening of a new art gallery. The market value of the event is $120. Franca cannot claim a deduction as the market value of the dinner - in this case, $120 which she receives in return for her contribution of $1,300 - is greater than $100, even though it is less than 10% of the value of her contribution.

7.23 A deduction is allowed for either a contribution of cash or property made in respect of a right to participate in a fund-raising event; and/or a contribution of cash for the purchase of goods and services at a fund-raising auction conducted by a DGR. To be eligible for the deduction, the fund-raising event must meet the criteria set out in section 40-165 of the GST Act (see paragraphs 7.20 and 7.21).

Example 7.5 Phillip pays $300 to attend a play hosted by a DGR, which is open to the public and costs $30 a ticket on the open market. Phillip can claim a deduction of $270 ($300 less $30).

Example 7.6 Natasha successfully bids $2,000 for a T-shirt at a DGR fund-raising auction. The T-shirt has a market value of $50. Natasha can claim a deduction of $1,950 ($2,000 less $50).

Example 7.7 Rebecca donates a crate of lobsters, which she purchased a few days before for $260 and which has a market value of $260, to a DGR to be sold at a fund-raising auction. In return for her generosity, she is given a ticket to attend the auction. The ticket to the auction has a market value of $20. At the auction, Rebecca successfully bids $2,000 for a chair with a market value of $90. She also bids $1,000 for a painting with a market value of $100. Rebecca can claim three separate deductions - one of $240 in respect of her contribution of the lobsters in return for the right to attend the auction; one of $1,910 for the purchase of the chair at auction: and a further $900 for the purchase of the painting.

Example 7.8 Christine pays $260 to attend a fund-raising luncheon organised by a political party. The luncheon is valued at $25. Christine cannot get a deduction even though the value of the minor benefit she received is less than $100 and 10% of the value of her contribution, because political parties are not DGRs and hence excluded from the operation of this amendment.

7.24 The 'market value' of the right to participate in a fund-raising event or of the goods and services purchased at a fund-raising auction is determined as at the day the contribution is made.

Example 7.9 Franca purchases a car for $20,000 and 11 months later contributes it to a DGR conducting a fund-raising event. At the time the car is contributed, it is valued at $15,000. In return for her generosity, the DGR gives her two tickets to the fund-raising gala performance, worth $100 per ticket. Franca cannot claim any deduction as the total value that she has received ($200 = $100 * 2 tickets) exceeds the $100 maximum benefit she is allowed to receive to claim a deduction under this amendment. However, if Franca accepts one ticket, instead of two, she can claim a deduction of $14,900, being the market value of the car at the time she made the contribution less the value of the benefit she received in return.

Example 7.10 Frances successfully bids at a charity auction organised by a DGR, $2,000 for a golf cap owned by a pop artist. The market value of the cap is assessed as no more than $100 at the time Frances purchased the item. However, a week after the purchase, the pop artist dies and the market value for similar items owned by the artist increases five-fold. Frances can still claim a $1,900 deduction ($2,000 less $100). Since the value of the cap has increased after the charity auction purchase, there is no effect on Frances' entitlement to a $1,900 deduction.

Deduction for contributions of property

7.25 The amendment only allows a deduction for contributions of property made in return for the right to participate at a fund-raising event. No deduction is allowed for contributions of property made by way of a consideration for the supply of goods or services at an auction sale.

7.26 A condition of the deduction requires that property that is contributed be either:

·
property owned by the contributor and valued by the Commissioner at more than $5,000; or
·
property purchased by the contributor and donated within 12 months of the purchase [Schedule 7, item 2].

Property that is trading stock may qualify under either of these conditions.

7.27 The valuation of property for contribution purposes under this amendment is consistent with the valuation of gifts under Division 30 and the income tax assessment rules governing the valuation of property generally.

7.28 For property purchased during the 12 months before making the contribution, the value of the contribution for the purposes of this amendment, is the lesser of the market value of the property on the day the contribution was made and the amount paid for the property. For contributions of property valued at more than $5,000 and not purchased during the 12 months before the contribution is made, the value of the property must be assessed by the Commissioner. [Schedule 7, item 2]

Example 7.11 Jean-Luc makes a contribution of a painting for a fund-raising event organised by a DGR seven months after he bought it. He purchased the painting for $500. At the time he makes the contribution however, the painting has increased in value to $4,000. In return, the DGR provides a ticket to a fund-raising luncheon with a market value of $40. Jean-Luc can only claim a deduction based on the value of his property assessed as the price he paid for it ($500), less the value of the luncheon. His deduction is $460.

Example 7.12 Leonie purchases a painting of an unknown artist for $1,000. Five years later when she contributes the painting to a DGR in relation to a fund-raising event, the painting has increased in value to $10,000. In return, the DGR invites Leonie to a fundraising event - a cocktail function where Leonie receives a benefit with a market value of $100. Leonie can claim a deduction based on $10,000, being the value of the painting at the time the contribution is made, provided that the value of the painting is confirmed by the Commissioner. Leonie can claim a deduction of $9,900 ($10,000 less the $100 benefit she received). (Leonie should be aware that she could be liable for CGT.)

GST inclusive market value

7.29 The valuation of the minor benefit derived by the contributor is to be calculated as the GST inclusive market value. The use of the GST inclusive market value in valuing a minor benefit is consistent with the valuation of gifts under Division 30 of the ITAA 1997. (The GST inclusive market value has the same meaning given in section 195-1 of the GST Act as section 995-1 of the ITAA 1997.)

Assessing the market value of a minor benefit

7.30 The DGR is responsible for determining the market value of the minor benefit given in return for a contribution. The amendment requires that where the DGR issues a receipt to a contributor, it must state either, the 'GST market value' of the right to participate in a fund-raising event or where a successful bid at a charity auction has been made, the GST market value of the goods or services purchased by the contributor. [Schedule 7, item 7]

7.31 An assessment of the market value of a 'minor benefit' involves making a reasonable estimate of what might be paid for the benefit in the open market 'in an arm's length transaction'. As a matter of practice, the process of determining a reasonable estimate of value may require the application of different valuation approaches, depending on the varying scenarios that may arise in the application of this amendment.

7.32 Evidence to support the reasonableness of the estimate may include:

·
comparisons of prices commercially charged for a good, service or event in the open market;
·
market comparisons derived from market observations by reference to similar or comparable goods, services or events offered in the market; or
·
an analysis of the market estimates of the costs associated with supplying the service or function using a cost based approach.

Estimate of the market value based on price or market comparisons

7.33 Price comparisons may be used to provide a reliable estimate of the value of a benefit where the benefit is a standard good, service or event that is commercially available in the local market. For example, the ticket price charged for events such as a concert, play, film screening, sporting match, a dinner show or similar event that is ordinarily open to the public, would provide an accurate estimate of the market value for such events.

Example 7.13 A DGR uses one evening's performance of a play as a fund-raising event and charges $350 a ticket to the evening's performance. The play is open to the public and ordinarily sells for $35 a ticket. The market value of that play is $35, being what a ticket to the performance would ordinarily fetch on the open market.

Example 7.14 A DGR hosts a fund-raising event at a restaurant involving a two-course charity luncheon. It charges $260 a head to attend the charity luncheon. The restaurant would ordinarily charge $22 per head for a two-course set lunch menu with a glass of wine and tea or coffee. The market value of the charity luncheon is hence $22.

7.34 Where the event is non-standard, not generally open to the public, or the market value of the event is not readily determined, a reasonable estimate of the market value can be made taking into account the market price that would be charged for similar transactions in the commercial sector. For example, in determining the value of a fund-raising event comprising a film screening with dinner included, where such an event has not been offered before in the local market, it may be possible to have regard to what would likely be charged on the open market for comparable entertainment such as a cabaret show or a concert performance with food and beverage included.

Example 7.15 A DGR wants to host, as a special fund-raising event, the opening night performance of a play, to be followed by cocktails and an opportunity to meet the performers. While the performance alone sells for $45 a ticket, the event (as a package with cocktails and meeting the performers) is not readily available on the open market and hence a price comparison may be difficult. A reasonable estimate of the ticket for the opening night's performance package may be obtained by establishing what might be reasonably charged for cocktails in that local market - in this example, the theatre may be asked to quote on a ticket price with catering included. If celebrity performers are involved, an estimate base on what the celebrity performer would ordinarily charge on the open market for a 'meet the performers' event would also need to be factored into the cost of providing that event. See paragraphs 7.39 to 7.40.

7.35 Market observations could elicit a reasonable estimate of market value for a comparable event in the local market. However, this may not always be possible. Where market data in the local market is limited or unavailable, sale comparisons from a wider market (e.g. from other Australian capital cities) may be appropriate.

Example 7.16 A DGR wants to stage an event involving a three-course dinner plus cabaret performance to be held in Wagga Wagga. In establishing the market value for such an event, the DGR could contact venues, such as clubs that offer comparable entertainment shows with dinner to gauge the cost that could be charged for such events on the open market. If comparison with similar entertainment in Wagga Wagga is not possible, a reasonable estimate of market value may be derived by either (a) using price comparisons of comparable events in other towns or cities; or (b) the DGR could contact a local catering company to establish the likely market value of catering a three-course meal.Note: that if (b) is used, the DGR would also need to establish the market value for other components of the entertainment package such as the show and the venue for the event using a cost-based approach to estimate the market value - refer to paragraphs 7.36 to 7.40. However, the benefits provided in this example would most likely take the value of the minor benefit beyond the 10% or $100 threshold rule that applies, in which case no deduction for the contribution is available.

Example 7.17 A DGR wants to stage a charity afternoon tea with a celebrity guest speaker. Given the uniqueness of the event, it would be difficult for the DGR to establish a market value based on a comparable event on the open market. A reasonable estimate of the market value of having that celebrity speak at an afternoon tea would entail establishing what the celebrity would ordinarily charge to attend such an event or what he or she would ordinarily charge for a couple of hours work.

Estimate of market value using a cost-based approach

7.36 Where a reasonable estimate of an event cannot be established using sale or price comparisons, an assessment of value using a cost-based approach may provide an alternative, for example, where the fund-raising event is unique or is not generally open to the public. In such cases it is difficult to establish a market value based on a market comparison - for example, a charity luncheon with a visiting member of the royal family or a literary or sporting celebrity.

7.37 A reasonable estimate of the market value of a benefit using a cost-based approach could involve a notional estimate of the costs of all the elements that would be required to stage an event on the open market. This could include a notional estimate of all input costs plus administrative costs including a component for insurance or contingency costs plus a profit element. The market value of the ticket price to the event, when calculated using this approach, is the sum of all associated costs divided by the estimated number of participants for the event.

Example 7.18 DGR A hosts a fund-raising luncheon with a celebrity sports star as a guest speaker. The costs associated with staging the event are:

Function costs
Guest speaker fees $ 5,000
Venue hire $ 2,000
Food and beverage $20,000
Catering staff $ 2,000
Marketing costs
Invitation mail-out $ 1,000
Printing invitations $ 1,500
Menu and other promotional material $ 1,000
Administration costs
Administration overheads $ 700
Insurance $ 2,000
Bump in/out costs $ 500
Total costs $35,700
Profit $ 1,900
Total costs plus profit $37,600
Unit cost per head (at 800 capacity) $ 47
Price charged per ticket $ 500
Market value of the minor benefit $ 47
The market value of the fund-raising event is $47. An individual who purchases a ticket to the event can claim a net deduction of $453, that is, ticket price ($500) less $47.

7.38 A reasonable estimate of the notional input costs associated with staging a fund-raising event may be based on what would be paid for the inputs on the open market in an arm's length transaction. This involves factoring all the true costs that would have to be incurred by the DGR on the open market to stage the fund-raising event, whether or not some or all of the inputs may have been donated to the DGR.

Example 7.19 DGR B hosts a fund-raising luncheon with a sports celebrity as a guest speaker. The DGR is able to secure a donation of all the function inputs to the event (representing a market value of $29,000), including the sports celebrity's time donated to the event. An estimate of the market value using the cost-based approach would include both actual and notional costs associated with staging the event:

Function costs
Guest speaker fees $ 5,000 - notional cost
Venue hire $ 2,000 - notional cost
Food and beverage $20,000 - notional cost
Catering staff $ 2,000 - notional cost
Marketing costs
Invitation mail-out $ 1,000
Printing invitations $ 1,500
Menu and other promotional material $ 1,000
Administration costs
Administration overheads $ 700
Insurance $ 2,000
Bump In/Out costs $ 500
Total costs $35,700
Profit $ 1,900
Total costs plus profit $37,600
Unit cost per head (at 800 capacity) $ 47
Price charged per ticket $ 500
Market value of the minor benefit $ 47
Notwithstanding the donation of $29,000 worth of inputs, the notional cost of staging the event would remain the same. The total costs (and hence unit cost per head) of staging the event would also remain unchanged. The market value of the fund-raising event remains $47. An individual who purchases a ticket to the event can claim a net deduction of $453, that is, ticket price ($500) less $47.

Assessing the cost of unique inputs

7.39 A reasonable estimate of the cost of certain inputs (e.g. the cost of a celebrity guest speaker or notable public figure), in a one-off event that is not open to the public, could involve establishing if the performer or celebrity would ordinarily charge a fee for the service on the open market. The fee or schedule of fees that a celebrity would ordinarily command on the open market for his/her services may be used to derive a reasonable estimate of the cost. Where no fee is ordinarily charged, this would reflect a zero notional cost in respect of the celebrity's services.

Example 7.20 DGR C hosts a fund-raising luncheon with a sports celebrity as a guest speaker. The sports celebrity does not ordinarily charge for his attendance as a guest speaker. An estimate of the market value using the cost-based approach would include both actual and notional costs associated with staging the event:

Function costs
Guest speaker fees $ nil
Venue hire $ 2,000
Food and beverage $20,000
Catering staff $ 2,000
Marketing costs
Invitation mail-out $ 1,000
Printing invitations $ 1,500
Menu and other promotional material $ 1,000
Administration costs
Administration overheads $ 700
Insurance $ 2,000
Bump in/out costs $ 500
Total costs $30,700
Profit $ 1,900
Total costs plus profit $32,600
Unit cost per head (at 800 capacity) $ 40.75
Price charged per ticket $ 500
Market value of the minor benefit $ 40.75
As the celebrity guest speaker does not ordinarily charge a fee for attendance at luncheon events, the total cost to DGR C of staging the luncheon event is $30,700. The minor benefit associated with the event would hence have a market value of $40.75 and a deduction of $459.25 ($500 less $40.75) can be made.

7.40 The market value of the right to attend or participate in a fund-raising event is deemed to be the market value at the time that the contribution is made (i.e. when a ticket is purchased for the event), rather than when the event is held [Schedule 7, items 2 and 7]. Any reasonable estimate of the market value of the minor benefit associated with an event should include an estimate of the input costs as at the time contributions are likely to be made.

Example 7.21 At the time tickets were sold for a dinner performance at which celebrity A would perform, Celebrity A's fees were $5,000. Before the event takes place but after tickets to the event are sold, Celebrity A's demand as a performing artist skyrockets and his fee substantially increases to $20,000. In calculating the costs of staging the event, Celebrity A's services still cost $5,000. Similarly, if unexpectedly on the day of the event, Celebrity A brings along a surprise guest - Celebrity B to co-host the performance, the cost of Celebrity B's fees need not be reflected in the estimate of costs of staging that event.

Estimate of the value of goods and services successfully bid at auction

7.41 The market value of the goods and services purchased in the course of a fund-raising auction is deemed to be the market value at the time that the contribution is made as consideration for the supply of the goods and services [Schedule 7, items 2 and 7]. Assessment of the market value of the goods and services purchased at an auction involves a reasonable estimate of what, would be charged for the goods and services in the open market in an arms length transaction.

7.42 Price comparisons may be used to provide a reasonable estimate of the value of standard market goods and services that are commercially available and have a transferable value on the open market. For example, the market value of a dinner for two, or a teapot purchased at auction, is the price that these items would normally fetch on the open market.

Example 7.22 Tim successfully bids $1,000 for a T-shirt that retails for $20. The value of the benefit of the T-shirt purchased at the auction, is the retail or market value of the item on the open market - $20. Tim can claim a deduction of $980 ($1,000 less $20).

7.43 Where the value of an item has been enhanced, for example a golf cap signed by a sports celebrity, or a T-shirt worn by a film star, a reasonable estimate of the market value of the good, will not be the original price of the item, but the amount it would reasonably achieve on the open market (e.g. at a specialist, curiosity or antique shop or a collectors internet site).

Example 7.23 Susan successfully bids $1,000 for a football signed by a high profile football team. The value of such an item fetches $550 on the sports memorabilia market. The value of the football is $550. Susan cannot claim a deduction under this amendment as the value of the benefit she received in return for her contribution exceeds both $100 and 10% of the value of her contribution.

Example 7.24 Marisa successfully bids $1,000 for a football signed by the local football team, which has a market value of $90. The day after the auction, the team wins the national titles and the market value of the football owned by Marisa appreciates in value to $1,000. Marisa can still claim a deduction of $910 ($1,000 less $90) for the item. Since the value of the signed football has increased after the fund-raising auction, there is no effect on Marisa's entitlement to the $910 deduction.

7.44 If, at the time of auction, the good or service has no alternative transferable value then it could be reasonably assumed that the market value would be nil. Examples of this would be the auction of a child's drawing at a fete or the right to participate in charitable activities which would result in no personal financial gain.

Example 7.25 Kim successfully bids $300 for the right to camp overnight in a public city park. As the right has no transferable market value, its market value is nil. Kim can claim a deduction for the full amount of $300 under the gift provisions of the ITAA 1997, rather than a contribution under this amendment.

Example 7.26 Brian successfully bids $260 to have the head of his friend Tim shaved at a fund-raising event. As the right has no transferable market value, its market value is nil. Brian can claim a deduction for the full amount of $260 under the gift provisions of the ITAA 1997

Special conditions that apply to deductions for contributions

7.45 The deduction under this amendment will only apply to individuals. An individual attending a fund-raising event may claim a maximum of two contributions (one for the individual and one for the individual's partner or associate) in relation to the same fund-raising event. There is no limit to the number of deductions that may be claimed for the purchase of goods and services by way of successful bids at a fund-raising auction. An individual may claim a deduction for both a right to participate at a fund-raising event (e.g. a fund-raising dinner auction) as well as for the purchase of goods or services purchased at that fund-raising event. See Example 7.7. [Schedule 7, item 2]

7.46 The amendment is applicable where an individual has not obtained a deduction for a donation under the gift provisions of the ITAA 1997. [Schedule 7, item 2]

Maintaining deductible contributions fund

7.47 In addition to all other receipt of gifts, DGRs that conduct fund-raising events must include in the Gift Fund that it maintains, the gross contributions received. Expenses incurred in providing any minor benefits to a contributor must be accounted for in the Gift Fund. [Schedule 7, items 4 and 5].

7.48 Where a fund has already been established by a DGR for the purpose of receiving gifts of cash or property, a separate fund for 'deductible contributions' will not be required.

7.49 The DGR is required to enter the whole amount of contributions (or the gross contributions) received relating to a fund-raising event into the 'deductible contribution' fund, including that part of the contribution that would have to be incurred by the DGR as an expense in providing the minor benefit in return for the contribution. [Schedule 7, item 5]

Content of receipt for deductible contributions

7.50 If a DGR issues a receipt in relation to contributions of property or cash received in relation to a fund-raising event, the receipt must include the following details:

·
the name and Australian Business Number (ABN) of the DGR;
·
the fact that the contribution is made in return for a right to attend a specified fund-raising event; or for the purchase of goods and services at a fund-raising auction;
·
the amount of the contribution - if the contribution is money; and
·
the value of the minor benefit (in respect of attendance at a fund-raising event and the purchase of goods and services at a fund-raising auction) provided by the DGR in return for the contribution, expressed in terms of the 'GST inclusive market value' of the minor benefit.

[Schedule 7, item 7]

Application and transitional provisions

7.51 The amendment applies to contributions made on or after 1 July 2004. [Schedule 7, item 13]

Consequential amendments

7.52 Subsection 30-15(3) of the ITAA 1997 which applies the definition of GST inclusive market value to the valuation of gifts of property, is amended to extend the provision to the valuation of contributions of property. [Schedule 7, item 3]

7.53 The existing requirement under subsection 30-125(4) of the ITAA 1997 is that a gift fund be maintained in respect of gifts of cash and property received. This is now extended to include the total 'deductible contributions' received as a result of fund-raising events. [Schedule 7, item 5]

7.54 Section 30-212 of the ITAA 1997 is amended to extend the current requirement for the Commissioner to determine the value of certain gifts of property under the Division 30 of the ITAA 1997 to certain contributions of property. [Schedule 7, item 6]

7.55 Section 30-228 of the ITAA 1997 is amended by extending the requirement for the issue of receipts by DGRs for donation of gifts, to the contributions of cash and property they receive. [Schedule 7, item 7]

7.56 The amendment is included in the index (section 30-315) in Division 30 of the ITAA 1997. [Schedule 7, item 8]

7.57 The amendment is added to the definition of 'apportionable deductions' under section 995-1. [Schedule 7, item 9]

7.58 'Fund-raising event' is to have the meaning given by section 40-165 of the GST Act, except for the omission of subparagraph 40-165(1)(b)(i) of that Act. Section 995-1 of the ITAA 1997 has been amended to reflect that definition of fund-raising event. [Schedule 7, item 10]

7.59 The amendment is added to the ITAA 1936 by inclusion in the definition of 'apportionable deductions' under subsection 6(1) and paragraph 6AD(3)(c). [Schedule 7, items 11 and 12]


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