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Edited version of private ruling

Authorisation Number: 1011527546033

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Ruling

Subject: Donations to a deductible gift recipient

Are you entitled to a deduction under section 30-15, item 2, paragraph (b) of the Income Tax Assessment Act 1997 (ITAA 1997) for a donation of shares to a deductible gift recipient (DGR)?

No.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You were a shareholder in a private company.

The company held shares in publicly listed companies.

You received an in specie distribution of publicly listed companies' shares which were valued by a third party at over $5,000.

The distribution was in consideration of cancelled private company shares.

You transferred for nil consideration some of the publicly listed companies' shares to a private ancillary fund.

The value of these shares on the basis of prices quoted on the Australian Stock Exchange was more than $5,000.

The fund is endorsed as a DGR.

Detailed reasoning

Section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a taxpayer is entitled to a deduction for a gift or contribution that they make in certain situations. The accompanying table to this section sets out the conditions that must be satisfied before a taxpayer is entitled to a deduction for a gift. It stipulates: 

Generally, a taxpayer will be entitled to a deduction for a gift or contribution that they make to an endorsed gift recipient, where it is a monetary gift or contribution of $2.00 or more. The gift may be in the form of money or property.

The type of gift allowed under paragraph (b) in item 2 of the table in section 30-15 of the ITAA 1997 is property or trading stock that a taxpayer purchased within the 12 months before making the gift. The amount that the taxpayer can claim as deduction is for property which is not trading stock the lesser of the market value and the amount you paid for the property.

The word purchase is not defined in the Act, therefore it has its ordinary meaning. The Macquarie Dictionary defines purchase as to acquire by the payment of money or its equivalent; buy.

In this case, the donation you made to the DGR was from shares that you acquired due to the cancellation of your interests in a private company. You did not purchase these shares.

The general rule is that the property must have been purchased by the taxpayer during the 12 months before the gift was made, and accordingly, a gift of property by a donor who received the property initially by way of gift, devise or request would not be deductible. 

In this case, the donation made to a DGR has not been made in accordance with the legislative requirements. Therefore, a deduction under section 30-15, item 2, paragraph (b) of the ITAA 1997 is not allowed.

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