Edited version of private ruling

Authorisation Number: 1011602897122

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Ruling

Subject: gift deductions

Are costs incurred to purchase or lease, register and insure a vehicle for a registered deductible gift recipient (DGR) considered a gift for taxation purposes where you retain legal ownership and control over the property?

No.

This ruling applies for the following period

Year ending 30 June 2011

Year ending 30 June 2012

Year ending 30 June 2013

Year ending 30 June 2014

The scheme commenced on

1 July 2010

Relevant facts

You are an office bearer of a registered DGR (the Fund).

The Fund is in need of a new vehicle.

The Fund does not have the money needed to purchase a new vehicle at this time.

You propose to either purchase or lease a vehicle for the Fund to use.

You intend to keep the vehicle in your name so that you can monitor its use and, should the Fund fold, it will be yours to distribute to another DGR.

The Fund's logo will be on the vehicle and the Fund will pay for its own fuel.

You will pay for the insurance and registration on the vehicle.

Reasons for decision

Section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for non-testamentary gifts (of $2 or more) made to a DGR.

Taxation Ruling TR 2005/13 discusses what is considered a gift for taxation purposes.

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.

Rather than attempting a definition of gift, 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

To make a gift to a DGR, there must be a transfer of the beneficial interest in property to that DGR. It is a requirement that identifiable property has in fact been transferred to the DGR.

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. Upon the transfer, the DGR must receive full title, custody and control of the property transferred, so that the DGR is entitled to deal with the property in its own right to the entire exclusion of the giver.

If the DGR fails to obtain immediate and unconditional right of custody and control of the property transferred, or the DGR receives less than full title to the transferred property, a gift deduction will not arise.

In your case, you intend provide the Fund with a vehicle to use in carrying out its charitable purpose while keeping the legal title of the vehicle in your name, including registration and insurance. When transferring ownership of a motor vehicle, everything necessary would include transferring the ownership, registration and insurance of the vehicle to the Fund. What you propose to transfer to the Fund will be less than full title and therefore no gift deduction will be available to you.

Transfer made voluntarily

In order for a transfer of property to be a gift, it must be made voluntarily, that is, it must be the act and will of the giver, and there must be nothing to interfere with or control the exercise of that will.

In your case, there is no suggestion that what you propose to do is not a voluntary act on your part.

Arises by way of benefaction

An essential attribute of a gift is that benefaction is intended, and in fact conferred on the recipient. Conferring benefaction means that the DGR is advantaged in a material sense, to the extent of the property transferred to them, without any countervailing detriment arising from the terms of the transfer.

In your case, what you propose will provide the Fund with a vehicle to use for its charitable purposes while you maintain the legal ownership of the vehicle. There does not appear to be any detriment to the Fund as a result of what you propose.

Material benefit or advantage is received by the giver

Subsection 78A(3) of the Income Tax Assessment Act 1936 (ITAA 1936) deems a benefit to be received by the giver or the associate of the giver in relation to a gift of property other than money where the terms and conditions on which the gift is made are such that they:

· fail to give unencumbered legal and equitable title to the DGR

· allow title to the property to be defeased upon fulfilment of the terms and conditions governing the transfer, so that the property reverts to the ownership of the giver or associate of the giver

· fail to give immediate custody and control over the property to the DGR, or

· fail to give unconditional rights of custody and control over the property to the DGR.

In your case, what you propose will not give unencumbered legal and equitable title of the vehicle to the Fund; and it will not give immediate custody and control over the vehicle to the Fund. Therefore, under section 78A of the ITAA 1936 you will be deemed to have received a benefit in relation to the vehicle.

Conclusion

Purchasing or leasing a vehicle to be used by the Fund in accordance with its charitable purpose, where you retain legal ownership and control over the vehicle is not considered a gift for taxation purposes. Therefore, no deduction will be available for the cost of the vehicle, the registration or the insurance under section 30-15 of the ITAA 1997.