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Edited version of private ruling
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Ruling
Subject: Gift to a deductible gift recipient
Question 1
Is the gift amount of $X to the Foundation tax deductible for the Taxpayer on his income tax return for the year ended 30 June 2010 in accordance with section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No.
This ruling applies for the following period:
Year ending 30 June 2010
The scheme commences on:
23 July 2009
Relevant legislative provisions
Income Tax Assessment Act 1997 30-15.
Relevant facts
The Taxpayer established a Foundation which is a deductible gift recipient (DGR).
The Taxpayer made a cheque payable to the Foundation for an amount.
The cheque was deposited into the Foundation's bank account.
An error was made by the bank in the amount that was deposited into the Foundations account.
The error was not detected by the Taxpayer, the bank or the Foundation in the income year that the gift was made.
The error was not detected until more than 12 months later.
At the time of the request for advice the remaining balance of the gift had not been transferred from the Taxpayer to the Foundation.
Summary
The gift is not deductible in full for the Taxpayer in accordance section 30-15 of the ITAA 1997. The gift is deductible to the extent of the amount that has been transferred to the Foundation.
Detailed reasoning
The cheque was made payable to the Foundation, however due to a bank error only a small portion of the amount was transferred into the Foundation's account.
The error was not detected or rectified during the income year.
Paragraph 13 of Taxation Ruling 2005/13 states that one of the features of a gift is that there is a transfer of the beneficial interest in the property. For this to occur the property of the giver must become the property of the DGR. Where only part of what is owned is given, only part of what is transferred can be a gift.
If the DGR does not obtain immediate and unconditional right of custody and control of the property transferred then a gift will not arise.
The error was not detected until more than 12 months after it occurred. For the financial year in question the Taxpayer is entitled to claim the portion of the gift that was paid, as that was the only amount the Foundation obtained immediate and unconditional right to.