Edited version of private ruling

Authorisation Number: 1011756229918

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Ruling

Subject: Deductibility of a donation

Question and answer:

Are you entitled to a deduction in relation to the purchase of jewellery at a charity auction?

No.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commenced on:

1 July 2009

Relevant facts:

You attended a charity ball and auction in the income year ending 30 June 2010.

The auction catalogue included jewellery.

The terms of the auction stated that any price paid in excess of the cost of the jewellery was to be a donation to the charity.

You were the successful bidder for a piece of jewellery at the auction.

The market value of the jewellery on the day of the auction was difficult to determine due to the unique nature of the piece. However, a gem contained within the piece of jewellery was valued at more than $XXX 2010.

You received a gift receipt from the charity for your donation.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 30-15

Income Tax Assessment Act 1997 Section 30-20

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

Section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) contains a table which sets out the situations in which a taxpayer can deduct a gift or contribution. The table specifies:

· who the recipient of the gift or contribution can be

· the type of gift or contribution that a taxpayer can make

· how much a taxpayer can deduct for the gift or contribution

· any special conditions that apply.

Item 8 of the table provides that a fund, authority or institution can be the recipient of a deductible contribution made by way of consideration for the supply of goods and services for successful bidding at a charity auction as part of a fund-raising event. Item 8 applies to contributions made on or after 1 July 2004.

Recipient of the contribution

Item 8 of the table specifies that the recipient must be a deductible gift recipient that is a fund, authority or institution covered by item 1 or 2 of the table. Item 1 of the table refers to a fund, authority or institution covered by an item in any of the tables in Subdivision 30-B of the ITAA 1997. The table in subsection 30-20(1) of Subdivision 30-B of the ITAA 1997 sets out general categories of health recipients. Item 1.1.6 specifies a charitable institution whose principal activity is to promote the prevention or the control of diseases in human beings.

In your case, the recipient is a charity. Therefore the charity is covered by item 1.1.6 of the table set out in subsection 30-20(1). It is endorsed as a deductible gift recipient.

Therefore, in your case, the recipient of the contribution meets the requirements for allowing you a deduction.

Type of contribution

Item 8 of the table provides that a contribution may be money if:

· the amount is more than $150

· the contribution is not a gift

· the taxpayer made the contribution by way of consideration for the supply of goods or services

· the taxpayer made the contribution because he or she was the successful bidder at an auction that was a particular fund-raising event in Australia or was held at a particular fund-raising event in Australia, and

· the amount of the contribution exceeds the GST inclusive market value, on the day the taxpayer made the contribution, of the goods or services.

"Fund-raising event" is defined in section 995-1 of the ITAA 1997. Any of the following is a fund-raising event if it is conducted for the purpose of fund-raising and it does not form any part of a series or regular run of like or similar events:

· a fete, ball, gala show, dinner, performance or similar event

· an event comprising sales of goods if selling such goods is not a normal part of the supplier's business (except an event that involves the sale of alcoholic beverages or tobacco products)

· an event that the Commissioner decides, on an application by the supplier in writing, to be a fund-raising event.

In your case, the contribution was money and the amount was more than $150. The contribution was not a gift and was made by way of consideration for the supply of the jewellery. The auction fits within the definition of a fund-raising event because it was conducted for the purpose of fund-raising, it was a ball and the sale of jewellery was not a normal part of the supplier's business. You made the contribution because you were the successful bidder at an auction at a particular fund-raising event. The amount of the contribution exceeded the GST inclusive market value on the day you made the contribution.

Therefore, your case meets the requirements regarding the type of contribution for which a deduction is allowed, if the other requirements of section 30-15 of the ITAA 1997 are met.

Special conditions

Item 8 of the table specifies special conditions that pertain to the contribution.

One condition is that the GST inclusive market value of the goods or services, determined on the day the taxpayer made the contribution, must not exceed the lesser of:

· 20% of the amount of the contribution and

· $150

In your case, 20% of the contribution was more than $150 so the lesser of the two options is $150. The GST inclusive market value of the jewellery on the day of auction was not readily ascertainable but it would have exceeded $150 because at that time the gem it contained had a market value in excess of this amount.

Therefore, in your case, the special conditions for allowing a deduction for a contribution are not met.

In conclusion, the contribution you made when you were the successful bidder at a fund-raising auction is not deductible because it does not meet all the requirements for deductibility as set out in section 30-15 of the ITAA 1997.