Edited version of your written advice

Authorisation Number: 1051233331842

Date of advice: 30 June 2017

Ruling

Subject: Cultural gifts - date of donation

Question 1

Is the donation deductible under section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997), and if yes, what is the date of donation?

Answer

Yes, 2015

This ruling applies for the following periods:

1 July 2014 to 30 June 2015

1 July 2015 to 30 June 2016

The scheme commences on:

1 July 2014

Relevant facts and circumstances

● The Taxpayers made a donation under the Cultural Gifts Program to an institution in Australia (the Institution) that consists of a public museum and a public gallery

● A valuation was provided in X 2015

● A valuation was provided in Y 2015

● A Certificate of Donation form, from the Commonwealth’s Attorney-General’s Department, Ministry of the Arts has been prepared by the Institution. The form has a chronological nature and contains the following sections;

1. Name and address of donor(s)

2. Item(s) being donated

3. Declaration by donor(s), National Cultural Heritage Account, Acknowledgement, and Certification, and

4. Endorsement of acceptance of donation by recipient institution

● The Certificate of Donation issued by the Institution states, on the front page, the date of donation as Z 2015

● Section 3 at item (g) of the Certificate of Donation – Declaration by Donor(s), states:

I/we am/are transferring to the recipient intuition;

(i) immediate, indefeasible and unencumbered legal title in the item(s)

(ii) immediate full custody and control of the item(s)

(iii) the unconditional right to retain custody and control of the property in perpetuity

(iv) custody, control or use of the property which is not affected by an arrangement entered into in respect of the making of the gift

● Section 3 at item (o) of the Certificate of Donation – Certification, states:

I understand that once I sign the Certificate of Donation and give the gift I cannot later revoke it and that my gift will form part of the institution’s permanent collection

● The Certification in Section 3 has been signed by a single donor (indecipherable) and is dated in AA 2015

● The Certificate of Donation date on the front page corresponds with Taxpayers diary entry for a meeting with recipient to discuss donating XXX.

● The Taxpayers state they did not complete a date on the Certificate of Donation at the meeting

● The Taxpayers assert the XXX were not donated prior to the written valuations being obtained as they wanted to know the average of the valuations

● Acknowledgement by the Department of Communications and the Arts is dated C 2016. The Acknowledgement states the gift was made in Z 2015

● The Taxpayers lodged their 2015 tax return

● The Taxpayers have not yet completed a donation apportionment election form

Relevant legislative provisions

Division 30 of the Income Tax Assessment Act 1997

Section 30-15 of the Income Tax Assessment Act 1997

Section 30-200 of the Income Tax Assessment Act 1997

Section 30-249C of the Income Tax Assessment Act 1997

Subdivision 30-DB of the Income Tax Assessment Act 1997

Reasons for decision

Issue 1

Question 1

Summary

The donation made to the Institution is deductible under section 30-15 of the ITAA 1997 as it meets the conditions set out in sections 30-15(1) Table 4(e) and 30-200 of the ITAA 1997. The date of donation is AA 2015.

Detailed reasoning

Division 30 of the Income Assessment Act 1997 (ITAA 1997) outlines the guidelines for the deductibility of gifts and donations.

Section 30-15 of the ITAA 1997 provides that a gift to any funds or institutions listed is allowable as a deduction in the income year in which the gift is made, provided the gift meets the various conditions of the relevant subsections.

To be able to claim a tax deduction for a gift it must:

● be made to a deductible gift recipient (DGR)

● be a gift of money or property that is covered by a gift type, and

● be truly a gift.

Only gifts made to a Deductible gift recipient (DGR) are tax deductible. The gift has been made to the Institution which is a DGR.

Division 30 of the ITAA 1997 sets out the rules for working out deductions for certain gifts or contributions that you make. It provides that a taxpayer will be able to claim a deduction for a gift or contribution made during the year to DGR funds if certain conditions are met.

Section 30-15(1) Table 4(e) of the ITAA 1997 states that both conditions and special conditions apply to a transfer of property to an institution in Australia that consists of a public museum and a public gallery.

The conditions are:

● The type of gift or contribution is property

● Generally you can deduct the average of the GST inclusive market values specified in the written valuations you’ve obtained. Subdivision 30-C sets out the exemptions to the general rule

● Special conditions apply;

a) The property must be accepted by the recipient for inclusion in a collection it is maintaining or establishing, and

b) The value of the gift must be $2 or more, and

c) You must satisfy the valuation requirements in in section 30-200 of the ITAA 1997

It is first necessary to determine if a gift has been made.

A true gift

Taxation Ruling 2005/13 explains what constitutes a gift. The term gift is not defined in the legislation and so for the purposes of Division 30 of the ITAA 1997, it has the ordinary meaning. 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, and

● no material benefit or advantage is received by the giver by way of return.

If a transfer fails one or more of these attributes, the transfer will not be ordinarily considered as a gift.

In relation to the first characteristic TR 2005/13 advises at various paragraphs that:

Transfer of beneficial interest in property

16. The making of a gift to a DGR involves the transfer of a beneficial interest in property to that DGR.

17. It is a requirement that identifiable property has in fact been transferred to the DGR.

18. For there to be a transfer, the property which belonged to the giver must become the property of the DGR. A gift is effectual only where the giver has done everything that is necessary, in accordance with the relevant laws governing the transfer of that kind of property, to transfer ownership to the DGR….

21. The provision of services to a DGR by a volunteer does not constitute a gift, as the ordinary meaning of property does not include services. Any expenditure incurred by the volunteer in the course of providing the unpaid services does not constitute a gift. Nor is it deductible under section 8-1 of the ITAA 1997 as a loss or outgoing incurred in gaining or producing assessable income.

22. Of course, where a volunteer does make a gift of money or other property to a DGR, the fact that the giver is a volunteer does not prevent it being a tax deductible gift, and

Transfer must occur

61. The making of a gift to a DGR involves the transfer of money or property to that DGR: section 30-15 of the ITAA 1997. In the simplest cases this involves the delivery of money (cash, cheque or electronic transfer of funds) or goods to the DGR.

62. In each case it is necessary to ascertain whether a transfer has occurred, what property has been transferred, and when the transfer took place. This is to ensure that ownership of identifiable property has been divested and has been transferred to the DGR (c.f., Re Rose (dec'd); Rose v. Inland Revenue Commissioners [1952] 1 All ER 1217).

63. In Milroy v. Lord, Turner LJ said that for a gift to be valid and effectual, the giver:

must have done everything which according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him….

Therefore, for there to be a transfer, the property which belonged to you must become the property of the Institution.

At section 3, item (g) of the Certificate of Donation – Declaration by Donor(s), the Taxpayers have agreed that the transfer is immediate, indefeasible and unencumbered legal title in the XXX. At section 3, item (o) of the Certificate of Donation – Certification, the Taxpayers have agreed that once they signed the Certificate of Donation and gave the gift they could not later revoke it and that the gift would form part of the institution’s permanent collection.

Section 3 – Certification, has been signed by the donor on 2015. Therefore, date of the gift was irrevocably given is AA 2015. Section 4 - Endorsement of Acceptance of donation has been completed and when the gift was accepted by the Institution on the basis that the item/s will form part of the institution’s permanent collection.

The transfer meets the requirements to be considered a gift as:

● there has been a transfer of the beneficial interest in property

● the transfer has been made voluntarily

● the transfer arose by way of benefaction, and

● no material benefit or advantage has received by the giver by way of return

Therefore, a transfer of XXX to the Institution has occurred and the transfer took place AA 2015. The relevant donation date for the gift made by the Taxpayers to the Institution is AA 2015.

Special conditions

It is necessary to consider whether the special conditions relevant to gifts under to Section 30-15(1) Table 4(e) of the ITAA 1997 have been met.

The gift was accepted by the Institution in AA 2015 and the value of the gift was in excess of $2. Therefore, the first two special conditions have been met.

However, you must also satisfy the third special condition, that is, the valuation requirements in section 30-200 of the ITAA 1997

Valuation conditions

Section 30-15(1) Table 4(e) of the ITAA 1997 discusses the four conditions for written valuations:

● You satisfy the requirements if you get two or more written valuations of the gift

● The valuations must be made different individuals who are approved valuers of the type of gift you are donating

● Each valuation must state the GST inclusive market value of the gift on either the day the donation was made or, the day the valuation was made, and

● If the valuation states the GST inclusive market value of the gift on the day the valuation was made, it must have been made within 90 days before or after the donation was made

You have obtained two written valuations by different valuers and each has stated the GST market value.

However, the valuations you provided have been signed in X 2015 and Y 2015. Therefore, they have been made in excess of 90 days before the donation date – AA 2015. The Commissioner may, however, may allow a longer period. In this instance, we have decided to exercise this discretion and are allowing a longer period. As a result, the donation meets the four valuation conditions and therefore the three special conditions under Section 30-15(1) Table 4(e) of the ITAA 1997.

In conclusion, the donation date of your gift to the Institution is AA 2015 and is deductible under section 30-15 of the ITAA 1997.

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