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Ruling

Subject: Gifts

Reasons for Decision

Section 4-15 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that taxable income is calculated as assessable income less deductions.

The ATO's publication Giftpack - NAT 3132-12.2007 (Giftpack) states at page 6 that:

Most, but not all, gifts to DGRs are tax deductible. To be tax deductible a gift must be money or property covered by one or the following gift types:…

These gift types include money, property, shares, trading stock, cultural gifts, cultural bequests and heritage gifts.

You are entitled to a deduction from your assessable income for gifts made during the income year to nominated funds, authorities, institutions, bodies or specified organisations as stated in Division 30 of the ITAA 1997.

For a donor to claim a deduction for a gift, there are several requirements to be met as stated on page 78 of the Giftpack:

§ the gift must be made to a deductible gift recipient (DGR)

§ the payment must really be a gift

§ the gift must be of money or property that is covered by one of the gift types, and

§ any gift conditions must be satisfied.

The Gift must be made to a DGR

The recipient has been endorsed as a DGR on the basis that it qualifies as a PBI under item 4.1.1 of section 30-45 of the ITAA 1997. Thus gifts donated to the entity are tax deductible to the donor under section 30-15(1) of the ITAA 1997.

This requirement would therefore be met.

The Payment must really be a Gift

The term 'gift' is not defined in the ITAA. For the purpose of Division 30 of the ITAA 1997 the word 'gift' has its ordinary meaning.

Taxation Ruling 2005/13: Income tax: tax deductible gifts - what is a gift (TR 2005/13) states at paragraph 13:

13. 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.

In relation to the first characteristic TR 2005/13 advises at various paragraphs that:

Transfer of beneficial interest in property

16. The making of a gift to a DGR involves the transfer of a beneficial interest in property to that DGR.

17. It is a requirement that identifiable property has in fact been transferred to the DGR.

18. 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….

21. 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. Nor is it deductible under section 8-1 of the ITAA 1997 as a loss or outgoing incurred in gaining or producing assessable income.

22. Of course, where a volunteer does make a gift of money or other property to a DGR, the fact that the giver is a volunteer does not prevent it being a tax deductible gift.

Transfer must occur

61. The making of a gift to a DGR involves the transfer of money or property to that DGR: section 30-15 of the ITAA 1997. In the simplest cases this involves the delivery of money (cash, cheque or electronic transfer of funds) or goods to the DGR.

62. In each case it is necessary to ascertain whether a transfer has occurred, what property has been transferred, and when the transfer took place. This is to ensure that ownership of identifiable property has been divested and has been transferred to the DGR (c.f., Re Rose (dec'd); Rose v. Inland Revenue Commissioners [1952] 1 All ER 1217).

63. In Milroy v. Lord, Turner LJ said that for a gift to be valid and effectual, the giver:

must have done everything which according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him….

Money or property must be transferred to DGR

83. Services that are provided to a DGR by volunteers are not tax deductible as there is no transfer of property involved. Likewise any expenses that may be borne by the volunteer in the course of providing the services to the DGR are not deductible as gifts as there is no transfer of property to the DGR.

84. 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.

You have advised that you volunteer your services to a not for profit charity that is also a registered deductible gift recipient.

You have also advised that you donate the use of your property. Furthermore, you have also advised the costs per hour to operate your property whilst volunteering your services to the DGR.

As stated above at paragraph 18: 'For there to be a transfer, the property which belonged to the giver must become the property of the DGR.' In your case there has not been a transfer of property but rather the provision of the use of your aeroplane. The use of property does not constitute the transfer of property from the donor to the recipient. As a consequence the hourly cost of the use of your property is not considered to be a gift as outlined in TR 2005/13.

This requirement would therefore not be met.

It is considered that the first characteristic that 'there is a transfer of the beneficial interest in property' is pivotal to the remaining three characteristics as they hinge on the requirement that there has been a 'transfer of property' in the first instance and if this is not met then as a consequence the remaining three will also not be met.

The Gift must be of Money or Property that is covered by one of the Gift Types

This requirement is considered not to have been met on the basis that a 'gift' as per the definition outlined under TR 2005/13 has not been made.

Any Gift conditions must be Satisfied

For some DGRs, the ITAA 1997 imposes additional conditions affecting the types of deductible gifts they can receive, i.e. the gifts may only be tax deductible:

§ between certain dates, or

§ for a specific use.

There are no gift conditions attached to the types of gifts a PBI under item 4.1.1 of the table in section 30-45 of the ITAA 1997 can receive.

Conclusion

The provision of the use of property and the associated costs is considered not to constitute a gift for the purpose of meeting the requirements of section 30-15 of the ITAA 1997 as there has not been a transfer of a beneficial interest in property.

Thus the use of your property when volunteering your services to a deductible gift recipient, is not a gift and therefore not tax deductible.