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Ruling

Subject: Service for Donation

Facts:

The entity is endorsed as a health promotion charity deductible gift recipient item 1.1.6. The entity intends to provide at its website information from an array of professionals, writing articles based on their knowledge and experience.

Reasons for Decision:

Under section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) a taxpayer is entitled to an income tax deduction for non-testamentary gifts (to the value of $2 or more) they make to a deductible gift recipient (DGR), providing it meets requirements set out in the tables contained within that section. A gift that can be deductible to the donor includes:

Money

Property (including trading stock) purchased during the 12 months immediately before the gift was made

There is no provision for the donation of services to be claimed as an income tax deduction under the gift provisions.

Taxation Ruling TR 2005/13: Tax deductible gifts what is a gift, explains what a gift is for the purposes of the gift deduction provisions of Division 30 of the ITAA 1997.

12. 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.

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.

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 (emphasis added).

 TR 2005/13 explains

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.

Money or property must be transferred to DGR

83. Services that are provided to a DGR are not tax deductible as there is no transfer of property involved. Likewise any expenses that may be borne 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.

In the Explanation section of the Taxation Ruling an example is provided where a gift of services to a DGR is not a gift for the purposes of the gift provisions in the income tax legislation. Paragraph 85 reads as follows:

S works as an accountant for a registered tax agent, where her work is charged at $70 per hour. She also maintains a DGRs books on a volunteer basis, spending four hours each fortnight. She wants to claim a tax deduction for $280 per fortnight, being the four hours at her accountancy charge rate of $70. The notional expenditure is not a tax deductible gift; she has not transferred any property to the DGR.

In answer to the question, there would not be a transfer of identifiable money or property to the DGR. Instead, there would be the provision of services which, as TR 2005/13 explains, is not a gift for the purposes of the provisions of the ITAA 1997.