Edited version of private advice

Authorisation Number: 1051808847840

Date of advice: 1 March 2021

Ruling

Subject: Deductible gifts

Question 1

Was the date for the purpose of the donation the date the company ceased business?

Answer

Yes.

Question 2

Did Person A and Person B own the items that were gifted to the registered public benevolent institution?

Answer

Yes.

The items were owned by Person A and Person B as individuals.

Question 3

Does paragraph (d) of Item 1 in the second column of the table in section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the donation?

Answer

Yes.

The recipient of the gift was he registered public benevolent institution, which is a fund, authority or institution covered by an item in any of the tables in Subdivision 30-B, and the gift was property that will be valued by the Commissioner at more than $5,000.

Question 4

Does paragraph (d) of Item 1 in the third column of the table in section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the donation?

Answer

Yes.

The gift is property and will be valued by the Commissioner at more than $5,000 and as you did not purchase the property during the 12 months before making the gift the amount you can deduct is the value of the property as determined by the Commissioner.

Question 5

Was the property donated outside the ordinary course of business?

Answer

Yes.

The items were owned by Person A and Person B as individuals but provided to XXXX Pty Ltd on a consignment basis. The property was therefore donated outside the ordinary course of business as the individuals Person A and Person B were not operating a business.

Question 6

Will the deduction claimable by each of the individuals Person A and Person B be 50% of the value of the donated property?

Answer

Yes.

The property was jointly owned by Person A and Person B as individuals and therefore the deduction will be split evenly between them.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Person A and Person B purchased items from joint funds over many decades. The items were stored in their home or were in storage elsewhere.

Person A was the sole director and manager of Company A ("the company").

The company leased a shop front ("the shop") to sell the items owned by Person A and Person B on a consignment basis.

The lease at the shop ended on 30 June 20XX.

During May 20XX, Person A and Person B arranged with the General Manager of the registered public benevolent institution that any unsold items in the shop at the cessation of the business were to be donated to the registered public benevolent institution.

The registered public benevolent institution is a deductible gift recipient.

The company ceased trading at 5pm on the afternoon of 30 June 20XX.

Prior to the registered public benevolent institution taking on the lease at the shop, all unsold items in the shop were going to be taken off the floor in the lead up to and during the weekend of 29 June and 30 June and physically transported to premises as directed by the registered public benevolent institution.

Subsequently the registered public benevolent institution entered into a lease of the shop commencing 1 July 20XX so it was agreed that the items on hand could remain at the premises making the physical transition process for both parties easier as the donated items were able to remain in the store rather than being transported elsewhere which would have been done by close of business 30 June 20XX had the registered public benevolent institution not entered into a lease at the shop.

On 30 June 20XX a Certificate of Donation was signed by the General Manager of the registered public benevolent institution as an 'endorsement of acceptance of donation by recipient institution or organisation.'

The Certificate of Donation states that 'this is the date that the donation is formally accepted by the recipient institution/organisation and is the date adopted by the Commissioner of Taxation for both taxation and valuation purposes.'

The items were not trading stock donated outside the ordinary course of business. They were personal items owned by Person A and Person B and provided to the company to attempt to sell on a consignment basis through the shop but ultimately reverted to the Person A and Person B's possession (then the registered public benevolent institution's) when the business ceased.

The items were not sold to the company by the taxpayers but instead provided on a consignment basis.

The items are valued at over $5,000 collectively, a valuation will be completed by the ATO Valuation Services to determine the deductible value.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 30-15

Income Tax Assessment Act 1997 section 30-17

Income Tax Assessment Act 1997 section 30-45

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