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Edited version of your written advice
Authorisation Number: 1051359122287
Date of advice: 10 April 2018
Ruling
Subject: Donation to charity
Question
Would the flying hours paid by the company be considered a donation?
Answer
No
This ruling applies for the following period:
Period ending 30 June 2018
The scheme commences on:
1 July 2017
Relevant facts and circumstances
You are an Australian company.
Your company has interest in a related company.
The related company owns an aircraft that is leased by your company.
Your company provides flights for an eligible charity.
Your director volunteers to pilot the flights.
You are charged a commercial rate for the flight time of each flight.
The fuel for the flight is paid for by the charity.
The charge for flight time is absorbed by your company.
Relevant legislative provisions
Division 30 ITAA 1997
Reasons for decision
Division 30 of the Income Tax Assessment Act 1997 determines the grounds by which we can consider a donation to a charity eligible as a donation.
In determining whether the flying hours paid by the company can be considered a donation we need to take the following into account:
● Whether the Charity is a registered deductable gift recipient
● Whether the donation is a gift or a contribution.
● Whether the donation meets specific requirements of a gift type.
A Is the Charity a registered deductable gift recipient?
The charity has been registered with the Australian Charities and Not for Profits Commission since the 2012. The charity has been established since 200X. The charity has been registered with the ATO as a deductable gift recipient since 200X.
B Is the donation a gift or a contribution?
When you give a gift or make a contribution to a registered charity that is a deductible gift recipient (DGR) you may be able to claim a tax deduction. The amount you can claim will depend on the type of gift or contribution you make.
Broadly speaking:
● A gift is a donation of money or property made voluntarily with no material benefit to the donor. It must fall within our definition of a 'gift type'.
● If you receive a material benefit – that is if the donor receives something which has a monetary value from the DGR in return for their donation – the donation is called a contribution.
Gift
In order for a donation to be determined to be a gift the gift must be made to a deductible gift recipient, it must truly be a gift, and must fall within one of our gift types and must comply with any gift conditions.
In addition a gift also must be a transfer of money or property. The transfer must be made voluntarily. The donor does not receive anything in return for the gift. The donor must not materially benefit from the gift.
Contribution
In order for a donation to be considered a contribution you must receive a material benefit in return for your contribution.
For a contribution to be tax deductable it must be made to a deductible gift recipient, be in respect of an eligible fundraising event, be an eligible contribution and comply with any extra conditions that apply to some deductible gift recipients.
C Does the donation meet the specific requirements of a gift type?
To be tax deductible, a donor's gift must be covered by what we call a ‘gift type’ they are:
● Money: Gifts of $2 or more
● Property: As well as physical things (such as land and objects), property includes rights and interests that can be owned and have a value (such as shares and ownership rights)
● Cultural items: If your organisation is a public art gallery, museum or library the Cultural Gifts Program allows you to receive gifts of cultural items. These donations are exempt from capital gains tax (CGT) and your donor may be able to claim a tax deduction
● Heritage gifts: If your organisation is a National Trust and you receive a heritage gift to preserve it for the benefit of the public, your donor may be able to claim a tax deduction.
There are also examples of what are not considered a gift:
● buying items at a charity auction
● purchases of raffle tickets and art union tickets
● buying chocolates, pens and similar low cost items
● the cost of attending a fundraising dinner or concert, even if the cost exceeds the value of the dinner
● membership fees
● making a payment to a school building fund as an alternative to an increase in school fees
● providing a service – for example, a volunteer can't claim a deduction for their expenses in carrying out the voluntary work or the value of their unpaid work
● any payments made if you have an understanding with the donor that the payments will be used to provide a benefit to them
● gifts made under a Will
● gift vouchers donated to a DGR.
Under Section 30-15(2) 1 (b) of ITAA 1997 the type of gift or contribution refers specifically to property must be property (including *trading stock) that you purchased during the 12 months before making the gift;
The circumstance of your type of gift does not meet this definition or any of the other types of eligible gift types therefore cannot be claimed as a donation.
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