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Ruling

Subject: Assessable income and donation

Question 1

Is the payment you received for participating in a community forum assessable income?

Answer

Yes

Question 2

Are you entitled to claim a tax deduction for a donation made to a registered charity which is endorsed as a deductible gift recipient?

Answer

Yes

This ruling applies for the following periods:

Year ending 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You participated in a number of community forums and associated meetings.

You received payment to travel to and participate in the forums and meetings.

You donated your payment to a charity which is a Deductible Gift Recipient (DGR).

Relevant legislative provisions

Income Tax Assessment Act 1997 (ITAA 1997) Section 6-5

Income Tax Assessment Act 1997 (ITAA 1997) Division 30

Reasons for decision

Question 1

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes all ordinary income derived directly or indirectly from all sources.

Ordinary income has generally been held to include three categories, namely, income from rendering personal services, income from property and income from carrying on a business.

Relevant factors in determining whether a payment is ordinary income include:

· whether the payment is the product of any employment, services rendered, or any business

· whether the payment is expected and relied upon

· the character of the payment in the hands of the recipient

· whether the payment is received as a lump sum or periodically

· the motive of the person making the payment, although this is rarely decisive by itself.

Taxation Ruling IT 2639, at paragraph 3, defines 'income from personal services' as 'income that an individual taxpayer earns predominantly as a direct reward for his or her personal efforts by, for example, the provision of services, exercise of skills or the application of labour.'

The payment to a taxpayer for services rendered is assessable income, even though the taxpayer does not provide those services as an employee or in carrying on a business (Brent v. Federal Commissioner of Taxation (1971) 125 CLR 418; 71 ATC 4195; (1971) 2 ATR 563).

The courts have held that a voluntary payment or gift is generally ordinary income in the hands of the recipient where the receipt is the product of services rendered by the recipient (FC of T v. Harris (1979) 37 FLR 325; 79 ATC 4383; (1979) 10 ATR 84).

In your case, the payment was made to you in return for the services you provided by participating in the community forums and meetings. The payment falls within the meaning of income from personal services and will be included in your assessable income.

Question 2

Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997) provides the guidelines for the deductibility of gifts and donations. Section 30-15 of the ITAA 1997 provides that a gift to any funds or institutions listed is allowable as a deduction in the income year in which the gift is made, provided the gift meets the various conditions of the relevant subsections. 

To be able to claim a tax deduction for a gift, it must be:

· made to a Deductible Gift Recipient (DGR)

· a gift of money or property that is covered by a gift type

· truly a gift.  

In your case, the recipient is a DGR therefore you are entitled to a deduction for the donation you made.