Edited version of your private ruling

Authorisation Number: 1012451993230

Ruling

Subject: Donation program of a deductible gift recipient

Question 1

Can the Entity issue a receipt pursuant to section 30-228 of the Income Tax Assessment Act 1997 (ITAA 1997) on the basis that it has received a gift of money of $2 or more as per item 1 of the table in section 30-15 of the ITAA 1997 for gifts that it receives under the Proposed program?

Answer

Yes

This ruling applies for the following periods:

01 January 2012 to 30 June 2016

The scheme commences on:

01 January 2012

Relevant facts and circumstances

· The Entity is endorsed as a Deductible Gift Recipient (DGR) from 01 Jul 2000. It is covered by item 1 of the table in section 30-15 of the ITAA 1997.

· The Entity runs a program whereby a giver donates an asset to the Entity who then auctions it and retains the proceeds. The entity issues a receipt to the donor for the gift in some circumstances. The program is discussed further under the heading 'Existing program'.

· The Entity would like to offer an alternative program whereby the donor would engage an approved agent to auction the asset and instruct the agent to forward the proceeds from the sale to the Entity. The Entity is seeking advice as to whether it can issue a receipt to the donor under this program on the basis they have received a gift of money. This program will be discussed further under the heading 'Proposed program'

Existing program

· Donor completes a form donating their asset to the Entity.

· The Entity engages an agent to sell the asset at auction.

· The donor cannot set a reserve price for the asset.

· The agent auctions the asset and distributes 100% of the proceeds to the Entity.

· The Entity considers that the gift is a gift of property and issues a receipt pursuant to section 30-228 of the ITAA 1997 in instances where the donor can claim a deduction as set out in item 1 of the table in section 30-15 of the ITAA 1997.

· The auctioning agent waives its commission fee on the sale of the asset.

Proposed program

· Donor will contact the Entity to advise them that they wish to donate the proceeds of sale of their asset.

· Donor completes a form appointing the approved agent and authorising them to sell the asset and direct the proceeds of the sale to the Entity.

· Under some circumstances the donor can set a reserve price.

· The agent will waive its commission fee on the sale of the asset.

· The Entity will treat the gift from the donor as a gift of money and will issue a receipt pursuant to section 30-228 of the ITAA 1997 and in accordance with the rules set out in 1 of the table in section 30-15 of the ITAA 1997.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 30-15

Income Tax Assessment Act 1997 section 30-228

Reasons for decision

Summary

Under the Proposed program, the Entity receives a gift of money from the donor. This is because at the time when the Entity receives full title of the gift, it is in the form of money. When the Entity issues a receipt for the gift it can specify that it is for a gift of money and the value of the gift is equal to the amount received.

Detailed reasoning

When a deductible gift recipient receives a gift and issues a receipt for tax deduction purposes, section 30-228 of the ITAA 1997 sets out what must be included on the receipt. It states:

If a deductible gift recipient issues a receipt for a gift described in the relevant item of the table in section 30-15 to the fund, authority or institution, the deductible gift recipient must ensure that the receipt states:

(a) the name of the fund, authority or institution; and

(b) the ABN (if any) of the deductible gift recipient; and

(c) the fact that the receipt is for a gift.

In addition the publication GiftPack (NAT 3132) outlines additional information that could be included on the receipt that would be useful to donors. They are:

· the amount of money donated

· a description of any gifts of property and

· the date of the gift.

Item 1 of the table in section 30-15 of the ITAA 1997 outlines the type of gifts that can be received. They include money, property purchased during the 12 months before the gift was made and property valued at more then $5,000.

In order to assist them prepare their receipts the Entity is seeking confirmation that the gifts received under the Proposed Program are gifts of money. This can be determined by considering the features of a gift.

In Taxation Ruling TR 2005/13 Income tax: tax deductible gifts - what is a gift the characteristics or features that are attributable to a gift are described. They are:

· that 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.

In regards to the first point, the making of a gift to a DGR must involve the transfer of beneficial interest in property to that DGR. As outlined in paragraph 18 of TR 2005/13:

For there to be a transfer, the property that 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.

…

If the DGR fails to obtain immediate and unconditional right of custody and control of the property transferred, or less then full title to the transferred property is transferred, a gift deduction will not arise.

Under the existing program the donor transfers legal ownership of the asset to the Entity via the completion of a registration form. The Entity receives full title of the asset and therefore has the right to be listed as the seller of the asset at auction. Once the donation is made the donor has no rights to the asset, as is evident by the fact that they cannot set a reserve price. Under the existing program it is evident that the donor has made a donation of property, being the asset.

Under the proposed program, instead of the donor transferring legal ownership of the asset to the Entity, they appoint an approved agent to sell their asset at auction. Whilst they still retain ownership of the asset they have the right to set a reserve at auction (so long as the value of the asset is above a set minimum). Once the asset is sold, the agent, under the direction of the donor, transfers the proceeds of sale to the Entity. At the point in which the Entity obtains immediate right of custody and control of the gift, it is in the form of money. Therefore, under the proposed program, the donor is donating money to the Entity.

In regards to the remaining three features of a gift, these are also evident in the donations made under the Proposed Program. That is, the donation is made voluntarily, there is a benefit that is provided to the DGR and the donor does not receive a material benefit or advantage in return.

The Entity can issue a receipt for a gift under the Proposed Program. On the receipt, it can state that it has received a gift of money and list the value of the gift as the amount of money that it has received.