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Edited version of private ruling
Authorisation Number: 1011579016337
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Ruling
Subject: Gifts
What this ruling is about:
Do the donations that the entity receives as part of a fundraising project constitute a gift?
Ruling:
Yes
Years of income or periods to which this ruling applies:
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Commencement date of scheme:
1 July 2010
The scheme that is the subject of the ruling:
The entity is specifically listed as a deductible gift recipient in the Income Tax Assessment Act 1997 (ITAA 1997).
The entity and its associate have initiated a fundraising project.
The project involves donors donating a specified amount following which they will receive a commemorative plaque.
The cost of each plaque is significantly lower than the amount of the donation.
All proceeds from the project will be put towards the construction of a memorial.
Relevant provisions:
Income Tax Assessment Act 1997 Section 30-15
Income Tax Assessment Act 1997 Subsection 30-55(2)
Income Tax Assessment Act 1936 Paragraph 78A(2)(c)
Explanation: (This does not form part of the notice of private ruling)
Section 30-15 of the ITAA 1997 contains provisions for deductibility of a gift or contribution to an entity that is endorsed as a deductible gift recipient.
Taxation Ruling TR 2005/13 outlines the Commissioner of Taxation's view on tax deductible gifts.
Paragraph 13 of TR 2005/13 describes a gift as having the following characteristics and features:
· there is a transfer of beneficial interest in property;
· the transfer is made voluntarily;
· the transfer arises by way of benefaction; and
· no material benefit or advantage is received by the giver by way of return.
Applying this description to the entity's situation, the requested donation meets the first three criteria listed in paragraph 13 above for the following reasons:
· property (money) which belonged to the giver becomes the property of the entity. There is therefore a transfer of beneficial interest in property;
· the transfer of money from the donor to the entity is made voluntarily without any obligation imposed on the giver; and
· the giving of money by the donor to the entity confers benefaction on the entity by way of advantage in a material sense without any countervailing detriment arising from the terms of the transfer.
The issue of whether the installation of plaques constitutes material benefit to the donors needs to be considered.
Paragraphs 43 and 186 of TR 2005/13 state that mere public recognition of the givers' generosity is not material benefit or advantage. This includes acknowledgement in newsletters, annual reports or on a donors' board.
The example in paragraph 190 sets out circumstances similar to that of this entity where a DGR engraves donors' names on a granite wall in a central courtyard on its premises. It is the Tax Office's view that the advantage of having donors' names engraved on the wall is not considered material.
The provisions of these paragraphs apply to the donations and corresponding installation of plaques proposed by the entity. The plaques do not constitute material benefit to the donors (refer paragraph 190 of TR 2005/13) and therefore the donation is considered to be a gift.
Summary
The information contained in TR 2005/13 confirms that the donations made to the entity have all of the required characteristics and therefore constitute a gift. There is a voluntary transfer of beneficial interest (being a transfer of money); this provides a benefit to the recipient (being the receipt of money); and the giver does not receive any material benefit.
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