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Edited version of your private ruling
Authorisation Number: 1012060523186
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Ruling
Subject: Charity Auction
Question
Are you entitled to claim a deduction for the cost of purchasing an auction item at a fundraising event?
Answer: No
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
During 2010
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.
In the 2010-11 financial year you attended a charity ball run by a deductible gift recipient (DGR).
You made a successful bid at the charity auction for the right to redeem a prize.
A condition of the prize was that it had to be redeemed by a certain date.
You did not claim the prize by the expiry date and the right to claim the prize lapsed.
You estimate the value of the prize to be significantly lower than the amount you paid.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 30-1.
Reasons for decision
Taxation Ruling TR 2005/13 (Income tax: tax deductible gifts what is a gift?) provides the Commissioner's view on what is a gift for the purposes of the gift deduction provisions which are found in Division 30 of the Income Tax Assessment Act 1997 (ITAA1997).
Paragraphs 12 and 13, respectively, of TR 2005/13 state:
12. The term gift is not defined in the ITAA1997. For the purposes of Division 30 of the ITAA 1997 the word gift has its ordinary meaning.
13. Rather than attempting a definition of gift, the courts have described a gift as having the following characteristics and features:
§ There is a transfer of the beneficial interest in property
§ The transfer is made voluntarily
§ The transfer arises by way of benefaction
No material benefit or advantage is received by the giver by way of return.
Certain fundraising events encourage contributions which may extend minor benefits to the contributor. As a benefit is received in return, the contributor is not entitled to claim the contribution as an income tax deductible gift.
However, for contributions made to a fundraising event after 1 July 2007 may be partially deductible in certain circumstances. Although not a gift, a successful bid at a charity auction conducted by an endorsed DGR may be income tax deductible under item 8 of the table in section 30-15 of the ITAA 1997 where, amongst other conditions:
§ your contribution is money over $150
§ the purchase of goods and services as a successful bidder at the fundraising event
§ the benefit received by you must be no more than 20% of the value of the contribution or $100, whichever is less.
In applying the aforementioned to your situation, you won a prize of prize of approximately $5,000. Accordingly you are not entitled to a deduction for the contribution as it does not constitute a gift for these purposes as you received a material advantage as a result of this contribution, notwithstanding the fact you chose not to use the prize. Additionally, the value of the benefit exceeds $100, therefore it does not meet the conditions contained within item 8 of the table in section 30-15.
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