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Ruling
Subject: deduction for cost associated with donation of time
Question 1
Are you entitled to claim a deduction for the cost incurred when donating services to an overseas charity?
No.
This ruling applies for the following period
Year ended 30 June 2012
The scheme commences on
01 July 2011
Relevant facts and circumstances
Your employee and a colleague travelled overseas in 2011 to deliver workshops. There were costs involved in the travel.
These workshops were provided on behalf of an overseas charity.
The presenters donated their time and no income was received for the work done.
The charity is not listed as a deductible gift recipient in Australia.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1(1)
Income Tax Assessment Act 1997 section 30-227
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.
In order to be deductible under section 8-1 of the ITAA 1997, expenditure must have the essential character of an outgoing incurred in gaining assessable income. There must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income and the expenditure must not be capital, private or domestic in nature.
In your case, your employee did not travel overseas to undertake commercial activities. The trip was associated solely with the provision of workshops on behalf of the charity. Although you incurred costs associated with the trip these costs were not associated with the generation of your assessable income. Therefore no deduction is available under section 8-1 of the ITAA 1997.
Gifts
A deduction is allowable under the gift provisions where certain conditions are met.
Two of the conditions are that the donation must be a gift of cash or property and it must be made to a deductible gift recipient (DGR)
The charity is not a DGR and the costs associated with the volunteering of services does not constitute a gift as it was not a transfer of money or property.
Therefore a deduction under the gift provisions is not allowable.