Edited version of private advice

Authorisation Number: 1052165749273

Date of advice: 6 September 2023

Ruling

Subject: Tax deductible gifts

Question

Are the costs of air travel, local travel, food, and accommodation when volunteering overseas deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) or as a gift or contribution under section 30-15 of the ITAA 1997?

Answer

No

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are an individual taxpayer that is a resident for Australian tax purposes.

You want to help disadvantaged people overseas by providing voluntary services such as free labour to assist building projects and caring for disadvantaged children.

You will be providing the volunteer service in Country X.

You will take personal leave from your place of employment.

You are responsible for the costs of air travel, local travel, food and accommodation.

You will not receive any remuneration for your volunteer services.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 30-15

Income Tax Assessment Act 1997 Subdivision 30-B

Reasons for decision

Deductions

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

As you will not receive assessable income for your volunteer work, the expense is not incurred in gaining or producing assessable income and is private or domestic in nature. Volunteer services are not an allowable deduction under section 8-1 of the ITAA 1997.

Deductibility of gifts or donations

Division 30 of the ITAA 1997 set out the rules governing deductibility of gifts or donations.

Subsection 30-15(1) of the ITAA 1997 provides that a gift or contribution to a fund or institution is deductible in the income year for which it is made subject to satisfying the relevant requirements set out in the table in subsection 30-15(2) of the ITAA 1997.

The following special conditions are set out under item 1 of the table in subsection 30-15(2) of the ITAA 1997 and require that:

(a)          the fund, authority or institution must be in Australia

(b)          the fund, authority or institution must meet either the requirements of section 30-17 of the ITAA 1997 or be mentioned by name in the relevant table item in Subdivision 30-B; and

(c)           the value of the gift must be $2 or more; and

(d)          if the property is to be valued by the Commissioner - the requirements of section 30-212 are satisfied.

Meaning of gift

Taxation Ruling TR 2005/13 Income tax: tax deductible gifts - what is a gift, explains what a gift is for the purposes of the gift deduction provisions in Division 30 of the ITAA 1997. TR 2005/13 provides principles to determine if a particular transfer of money or property constitutes a gift.

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 states that 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.

Transfer of beneficial interest in property

For there to be a transfer of beneficial interest, the property which belongs to the giver must become the property of the deductible gift recipient (DGR).

Paragraph 61 of the TR 2005/13 explains that a transfer must occur when giving consideration as to whether a gift or donation is a deductible expense. The making of a gift to a DGR involves the transfer of money or property to the DGR. In the simplest cases this involves the delivery of money or goods to the DGR.

It is necessary to ascertain whether a transfer has occurred, what property has been transferred, and when that transfer took place.

In Case S43 85 ATC 343; (1985) 28 CTBR (NS) Case 49, the Board of Review affirmed the decision of the Commissioner to deny deductions for motor vehicle, postage and telephone expenses totalling $675 incurred by the taxpayer in the course of undertaking voluntary work for a DGR. The Board held that the taxpayer did not make a gift of money or property to the DGR. What the taxpayer gave was simply his services.

Application to your circumstances

As you will not receive assessable income for your volunteer work, the expense is not incurred in gaining or producing assessable income and is private or domestic in nature. Volunteer services are not an allowable deduction under section 8-1 of the ITAA 1997

You also cannot assign any of the expenses as a donation or gift. Donations need to meet the criteria set out in section 30-15 of the ITAA 1997. In your case, you have not made a donation to a DGR, no money or property is to be paid to an organisation located in Australia nor an authority listed in Subdivision 30-B of the ITAA 1997.

Paragraph 21 of the TR 2005/13 is also applicable to your circumstances. It states that 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, in accordance with section 30-15 of the ITAA 1997, nor is it deductible under section 8-1 of the ITAA 1997 as a loss or outgoing incurred in gaining or producing assessable income.

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