Edited version of your written advice

Authorisation Number: 1051472114265

Date of advice: 14 January 2019

Ruling

Subject: Income Tax: donations to fundraising event

Question

Will gifts or contributions made to the Taxpayer be tax deductible for the donor pursuant to Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

This ruling applies for the following period:

1 July 2018 to 30 June 2019

The scheme commences on:

During the year ended 30 June 2019

Relevant facts and circumstances

The Taxpayer is a charity which is endorsed as a deductible gift recipient (DGR).

It raises funds for two charities.

The Taxpayer holds an annual fundraising event known which is a free event organised by it to raise funds for the two charities.

It raises funds for its chosen charities from the support of businesses and individuals by way of monetary gifts to fund the annual fundraising event.

The event is a community fundraising event that is free of charge to the public to attend and participate.

There are no conditions imposed regarding the donations made to the Taxpayer for the fundraising event. Some of its supporters do not seek acknowledgement and others are publically acknowledged by it merely as a way of thanking them.

Contributions from donors to the Taxpayer for the fundraising event are generally received prior to the event but may also be received during the event.

It publically acknowledges its supporters for contributions made to support the fundraising event and this is done via its social media applications including the website.

Relevant legislative provisions

Income Tax Assessment Act 1997 Division 30

Income Tax Assessment Act 1997 Subdivision 30-B

Income Tax Assessment Act 1997 Subdivision 30-BA

Income Tax Assessment Act 1997 Section 30-15

Income Tax Assessment Act 1997 Subsection 30-15(1)

Income Tax Assessment Act 1997 Section 30-17

Reasons for decision

Summary

Donations equivalent to $2 or more made by a donor to the Taxpayer will be tax deductible as gifts or contributions.

Detailed reasoning

Gifts or contributions

Division 30 of the ITAA 1997 deals with the deductibility of gifts or contributions.

Section 30-15 provides a table to explain the special conditions which must be satisfied before a gift is allowable as a tax deduction to the donor. This summarised in subsection 30-15(1) as:

● who the recipient of the gift or contribution can be; and

● the type of gift or contribution that you can make; and

● how much you can deduct for the gift or contribution; and

● any special conditions that apply.

In relation to the gift recipient, section 30-15 provides that:

● The recipient must be a fund, authority or institution covered by an item in any of the tables in subdivision 30-B of the ITAA 1997, and

● The recipient must meet the requirements of section 30-17 of the ITAA 1997.

Section 30-17 of the ITAA 1997 provides that the fund, authority or institution must be an entity that is endorsed under Subdivision 30-BA of the ITAA 1997. This Subdivision sets out the rules about endorsement of entities as deductible gift recipients.

In this case, the Taxpayer is endorsed as a DGR and is therefore covered by Item 1 of the table in section 30-15 of the ITAA 1997.

Item 1 of the table in section 30-15 provides that a gift of money must be $2 or more to satisfy Division 30 as being tax deductible. As donations made by donors to the Taxpayer’s annual fundraising event are monetary in character, they will be deductible in this case, provided the donation is $2 or more.

Donations made by donors to the fundraising event may also come in the form of property or an item of the donor’s trading stock. Under subsection 30-15(2), this would amount to a tax deductable donation if the value of the gift is $2 or more.

Taxation Ruling TR 2005/13 Income tax: tax deductible gifts – what is a gift explains the meaning of a gift for the purposes Division 30 of the ITAA 1997.

Paragraph 12 of TR 2005/13 states that the term ‘gift’ is not defined in the ITAA 1997. For the purposes of Division 30 of the ITAA 1997 the word ‘gift’ has its ordinary meaning.

Paragraph 13 of the TR 2005/13 identifies the characteristics and features which the courts have used to describe a gift:

● 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.

In the circumstances of donations made to the Taxpayer for the annual fundraising event:

● there will be a transfer of beneficial interest in property as the gift in the form of money, property, or trading stock donated to the Taxpayer becomes its property to enable it to put the fundraising event together;

● the donations to the Taxpayer will be made voluntarily as it is up to the donors to decide whether they want to donate; and

● the donations made to the Taxpayer are by way of benefaction because they will enable it to run the fundraising event.

Materiality

Paragraphs 37 to 44 of TR 2005/13 deals further with the issue of ‘no material benefit or advantage’ and paragraph 41 states that only advantages or benefits that are material will disqualify a transfer of property from being regarded as a gift.

The following examples cited in paragraph 43 of TR 2005/13 are not a material benefit or advantage:

● one that has no link with the transfer;

● one that is insignificant in relation to the value of the transfer;

● one that only constitutes advertising for the DGR;

● one that cannot be put to use and is not marketable;

● one that does not create any rights, or confer any privileges or entitlements;

● one that merely accounts for the use of the funds;

● one that is mere public recognition of the giver’s generosity; or

● one that confers membership of a DGR which was neither sought nor known by the giver at the time of making the transfer.

In this case, the Taxpayer makes public recognition of donors to the annual fundraising event on its website and social media.

Paragraph 186 of TR 2005/13 states that the public recognition accorded to givers will commonly not be a material benefit. This includes mere acknowledgement in newsletters, annual reports, on a donors’ board, and so on. As Bowen CJ said in Leary v FC of T, ‘a man may, by his gifts, gain fame or formal honours without losing his tax deductions’

It is considered that acknowledging donors on modern social media outlets such as a website will not usually result in a material benefit or advantage to the donor in accordance (paragraph 186 of TR 2005/13).

Therefore, after consideration of the examples in TR 2005/13 and the relevant facts in this case, it considered that there will be no material benefit or advantage received by the donors when they are acknowledged in relation to the gifts or contribution to the Taxpayer.

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