Edited version of private ruling

Authorisation Number: 1011653250757

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Ruling

Subject: Donation to a deductible gift recipient

Are you entitled to a deduction under section 30-15, item 2, paragraph (d) of the Income Tax Assessment Act 1997 (ITAA 1997) for a donation of shares to a deductible gift recipient (DGR)?

Yes.

This ruling applies for the following period

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on

1 July 2009

Relevant facts

You were a shareholder in a private company.

The private company held shares in publicly listed companies.

The private company was placed into voluntary liquidation.

You received an in specie distribution of publicly listed companies' shares from the liquidator.

The distribution was in consideration for the cancellation of your private company shares.

On the same day as receiving the distribution, you transferred for nil consideration, some of the publicly listed companies' shares to a private ancillary fund which was endorsed as a DGR.

The shares that you transferred to the private ancillary fund have been valued by the Australian Valuation Office at over $5,000.

Assumptions

It is assumed that the terms of the trust deed allow the trustee to invest money that the fund receives because of the gift only in a way that an Australian law allows trustees to invest trust money.

Relevant legislative provisions

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

Income Tax Assessment Act 1997 Subsection 30-15(2)

Income Tax Assessment Act 1997 Section 30-212

Income Tax Assessment Act 1997 Subsection 30-247(1)

Income Tax Assessment Act 1997 Section 30-248

Reasons for decision

Summary

You are entitled to a deduction for the gift of shares to the private ancillary fund as the shares have been valued by the Commissioner at more than $5,000.

Detailed reasoning

Section 30-15 of the ITAA 1997 provides that a taxpayer is entitled to a deduction for a gift or contribution that they make in certain situations. The accompanying table to this section sets out the conditions that must be satisfied before a taxpayer is entitled to a deduction for a gift. It stipulates: 

· 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

· special conditions that apply.

Generally, a taxpayer will be entitled to a deduction for a gift or contribution that they make to an endorsed gift recipient, where it is a monetary gift or contribution of $2 or more. The gift may be in the form of money or property.

The type of recipient under item 2 is a public fund or a private ancillary fund established and maintained under a will or instrument of trust solely for:

(a) the purpose of providing money, property or benefits:

· to a fund, authority or institution gifts to which are deductible under item 1 of this table; and

· for any purposes set out in the item of the table in Subdivision 30-B that covers the fund, authority or institution; or

(b) the establishment of such a fund, authority or institution.

The type of gift or contribution allowed under paragraph (d) in item 2 of the table in section 30-15 of the ITAA 1997 is property valued by the Commissioner at more than $5,000.

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

There are some special conditions attached as follows:

· the terms of the Will or trust must allow the trustee to invest money that the fund receives because of the gift only in a way that an Australian law allows trustees to invest trust money, and

· the fund must meet the requirements of section 30-17 of the ITAA 1997, and

· if the property is to be valued by the Commissioner - the requirements of section 30-212 of the ITAA 1997 are satisfied.

Section 30-17 of the ITAA 1997 requires a fund to be either:

· legally owned by an entity that is endorsed under Subdivision 30-BA of the ITAA 1997 as a DGR for the operation of the fund, or

· under the control of one or more persons who constitute a government entity that is endorsed under Subdivision 30-BA of the ITAA 1997 as a DGR for the operation of the fund.

Section 30-212 of the ITAA 1997 states if you make a gift or contribution that is covered by a provision of this Division (Division 30) that refers to the value of property as determined by the Commissioner, you must seek the valuation from the Commissioner.

The recipient is an endorsed DGR for the operation of a fund (private ancillary fund). The gift you gave, for no consideration, was property valued by the Commissioner at more than $5,000. As all the conditions for deductibility have been met, you are entitled to a deduction for the value of the gift as valued by the Commissioner.

Subdivision 30-DB of the ITAA 1997 allows you to elect to spread deductions for certain gifts and covenants over up to five income years.

Subsection 30-247(1) of the ITAA 1997 in part states an election under this Subdivision may be made for a gift, made on or after 1 July 2003, that is a gift of money or property valued by the Commissioner at more than $5,000 made to a fund, authority or institution covered by item 1 or 2 of the table in section 30-15 of the ITAA 1997. There are further rules about deductibility of the gift under section 30-248 of the ITAA 1997.

As your gift was given to a fund covered by item 2 in the table in section 30-15 of the ITAA 1997 and it was made after 1 July 2003 you are entitled to spread the deduction over up to five years provided all the other conditions under section 30-248 of the ITAA 1997 are met.