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Ruling
Subject: Deductible gift recipient status
Question 1
Can the Trust apply gifts that it receives from entities which cannot claim a tax deduction for purposes other than those of the Trust, without losing its entitlement to endorsement as a Deductible Gift Recipient?
Answer
No
This ruling applies for the following periods:
Income Tax Assessment Act 1997 section 30-15.
The scheme commences on:
1 January 2011
Relevant facts and circumstances
The Trust is endorsed as a deductible gift recipient effective under the category of public ancillary fund.
The trust deed states:
"It is established and maintained solely for:
· the purpose of providing money, property, or benefits to Deudctible Gift Recipients (DGRs), which have a charitable purpose, or
· the establishment of DGRs, which have a charitable purpose.
The trust deed also states:
The beneficiaries of the Trust shall comprise the following:
· Any entity that exists for the public benefit or the relief of poverty.
· Any entity that exists as charitable within the legal sense of that term.
· Any entity that is solely for non-profit purposes and has a charitable purpose
· Any entity that is solely for charitable purposes
· provided that any such entity (whether fund, authority or institution mentioned… :
· ls an exempt entity as defined in sub-section 995-1(1) of ITAA 97; and
· Gifts to which are deductible under item 1 of the table in section 30-15 of ITAA 97.
The Trust receives donations from entities that are not eligible to claim a tax deduction on their donation because they are tax exempt entities.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 30-15.
Reasons for decision
The Trust is endorsed as a deductible gift recipient (DGR) on the basis that it is a public ancillary fund falling under item 2 of the table in section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997).
An ancillary fund is defined in that section as a fund established under will or instrument of trust solely for:
· the purpose of providing money, property or benefits:
· to a fund, authority or institution gifts to which are deductible under item 1 of the table in section 30-15 of the ITAA 1997; and
· for any purposes set out in the item of the table in Subdivision 30-B that covers the fund, authority or institution, or
· the establishment of such a fund, authority or institution.
The terms of the Trust's deed effectively states that its sole purpose is to provide money, property or benefits to DGRs that fall under item 1 of the table in section 30-15 of the ITAA 1997. This is in line with the requirements for an ancillary fund.
Provided the Trust continues to apply its funds as such, it will remain entitled to endorsement a DGR.
There is no scope in the legislation for an ancillary fund to apply its income for any other purpose. By doing so it would lose its entitlement to endorsement as a DGR.
Furthermore, the legislation does not distinguish between income that is received by donors who can claim a deduction and income received by donors who cannot claim a deduction. Therefore, income that is received by the Trust from other entities which are themselves income tax exempt and unable to receive a tax deduction is still income of the trust and must be applied for the purposes of the trust. If it is not, the Trust will lose its entitlement to endorsement as a DGR ancillary fund.
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