Edited version of your private ruling

Authorisation Number: 1012480253012

Ruling

Subject: Section 30-15 of the Income Tax Assessment Act 1997 - donation of family car

Question 1

Summary

The modified car is property for the purposes of section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) as it is property under the ordinary meaning of the word.

Detailed reasoning

No definition of property in Income Tax Assessment Act 1936 or Income Tax Assessment Act 1997, therefore takes on its ordinary meaning. Macquarie dictionary defines property as:

That which one owns, the possession or possessions of a particular owner.

Ownership, right of possession, enjoyment, or disposal of anything, especially of something tangible.

The modified car comes within the ordinary meaning of property. Therefore it is a property for Section 30-15 purposes.

Question 2

Detailed reasoning

The income tax assessment acts do not prohibit the donating of any property to a charity. What the acts do is in certain circumstances allow a tax deduction for the value of the donation.

Therefore, you are not prohibited from donating the modified car to the charitable trust set up for your child.

Question 3

Summary

The taxpayer is not entitled to claim a deduction under subsection 30-15(1) of the ITAA 1997 for donating the car to the charity, because they receive material benefits from the donation.

Detailed reasoning

Question 3

Summary

The taxpayer is not entitled to claim a deduction under subsection 30-15(1) of the ITAA 1997 for donating the car to the charity, because they receive material benefits from the donation.

Detailed reasoning

Division 30 0f the Income Tax Assessment Act 1997 (ITAA 1997) deals with the deductibility of gifts or contributions.

A deduction is subject to the following conditions:

· the donation must truly be a gift in that it is voluntary and it does not provide a material benefit to the donor, such as, raffle tickets;

· It must be made to a deductible gift recipient;

· If it is a gift of money, it must be of $2 or more; or

· If it is a gift of property, further conditions contained in Division 30 of the ITAA 1997 must be satisfied.

The additional conditions that a gift of property must satisfy to be deductible are:

The property must have been purchased by you in the 12 months prior to making the gift, or

The property must be valued by the Commissioner at more than $5000.

There are further conditions if the property are shares I a listed public company, which are not relevant to your situation.

It is acknowledged from the facts provided with the ruling request, that conditions 2,3, and 4 will be satisfied. Therefore, in order for the donation to give rise, to a tax deduction under Division 30 of the ITAA 1997, it only needs to be determined whether the donation is truly a gift.

Taxation Ruling TR 2005/13 explains the term gift for Division 30 of the ITAA 1997 purposes.

The ruling states in paragraph 12 that as the term 'gift' is not defined in the ITAA 1997 it has its ordinary meaning.

Paragraph 13 goes on to say that the courts have not defined the term, but have described a gift as having the following characteristics and features. If there is a transfer of the beneficial interest in the 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

Paragraphs 16-19 of TR 2005/13 - The making of a gift to a DGR involves the transfer of a beneficial interest in property to the DGR. The 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, a gift deduction will not arise.

In your case it is considered the DGR does not have full control of the donated vehicle, as it will not only be used in the find raising activities but also to transport the child e.g. to her medical appointments. Hence, the gift/donation does not have this characteristic.

Transfer is made voluntarily.

Paragraph 23 of TR 2005/13 states:

'In order for transfer of property to be a gift it must be made voluntarily, that is, it must be the act and will of the giver, and there must be nothing to interfere with or control the exercise of that will.

This characteristic arises out of case authorities such as Cyprus Mines Corporation v FC of T 78 ATC 4468; 9ATR 33.In your case it is considered the transfer of the car to the DGR was made voluntarily.

Arise by way of benefaction

Paragraphs 27-28 of TR 2005/13 state that the intention benefaction is an important characteristic of a gift. Conferring benefaction means that the DGR is advantaged without any countervailing detriments, obligations, disadvantages or limitations.

Where the giver is aware at the time of transfer of any detriments, disadvantages, obligations, liabilities or limitations, at the time of transfer, the attribute of benefaction may be missing and no deduction allowable (Section 78(2)(a) of the ITAA 1936).

The detriment etc if immaterial will not effect whether the transfer is a gift. It is considered in line with example 32 in paragraph 120 of TR 2005/13 that the upkeep e.g. running costs of property donated are immaterial obligations, which will not affect the benefaction intention.

No Material benefit or advantage

Where the giver is aware that the transfer of property will result in material benefit by way of return to the giver, this will disqualify the transfer as a gift.

Paragraph 37 of TR 2005/13 states the giver of the gift must not receive any material benefit from the making of the gift.

In this case it is considered you, the giver receives a benefit from the gift. The benefit being

you still have the use of the vehicle to transport your child.

The running costs of the car will now be paid for from funds raised by the DGR and

The car will be used to find raise to help cover the costs of your child's needs.

Note: Subsection 78(3) of the ITAA 1936 deems a benefit to be received by the giver or an associate of the giver where the giver returns the right to use the donated property under the terms and conditions of the transfer.

Although in your case there may not be expressed transfer conditions, the reality is the vehicle is still being used directly for the transportation of your child, as it would be if not donated.

It is considered the benefits received are material and hence the required characteristic of no material benefit is not present in the gift.

Conclusion

Two of the characteristics required for a gift to truly be a gift are not present. Therefore you are not able to claim a deduction for the donation of the car to the DGR.

Question 4

Detailed reasoning

The Commissioner accepts from the sales contract for the vehicle that its present value is more than $10,000, as the June 2011 value was $28,000.

Question 5

Detailed reasoning

No. See response to question (3) as to why a tax deduction is not allowable in your circumstances.

This ruling applies for the following periods:

1 July 2012 to 30 June 2013

The scheme commences on:

31 March 2011.

Relevant facts and circumstances

The taxpayer started a charitable trust for his child as they are suffering from a rare genetic disorder.

The taxpayer is the chairman of the charitable trust and sits alongside four other independent board members. The organisation conducts regular board meetings to discuss the business of the trust, its fundraising activities and the approval of expenditure of the trust. Expenditure is limited to the provision of medical treatment, therapy and medical aids for the child, along with expenditure incurred in the fundraising activities of the trust.

So, it can be established that the business of the trust includes on one hand the activities of fundraising and generating an income to provide financial assistance for treatment and well-being and on the other hand the actual provision of such treatment. In all cases, the business of the trust is fully dependent on having a custom fitted vehicle to carry out its objectives.

To assist with the transportation of their child a considerable sum was spent to modify the family vehicle and have it fitted with a second row wheelchair conversion, The cost of the conversion (after government subsidy) was substantial. To help with this cost of the conversion, the charitable trust paid for the family car to be modified as the modification was in the best interest and the taxpayer did not have these funds available at their disposal. The modification has now enabled the child to be driven around more comfortably and at considerably greater ease for parents and carers. She can now be transported without being removed from wheelchair.

The fundraising activities of the trust have expanded to include the sale of specially made soft toys called "Help Bears" which are now merchandised through a network of stores in the North East reaches other various locations. The bears are manufactured in sheltered workshops in South Dandenong with the aim of enabling other charitable organisations to also generate an income. As you can imagine, merchandising involves considerable travel to not only collect the bears but also to distribute them throughout the stores and includes the transportation of mainly bulky goods, for which a conventional motor car is impractical.

It is almost essential therefore that the organisation has its own motor vehicle to achieve the two outcomes of transporting her for her medical treatments and to assist with its fundraising activities. The trust however cannot afford to purchase its own vehicle. The taxpayer has now also been required to foot the considerable running costs, maintenance and depreciation of the vehicle which is used solely to conduct the business of the trust. It would follow that the vehicle running and maintenance costs would then be met by the trust.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 30-15

Income Tax Assessment Act 1997 section 30(b)

Income Tax Assessment Act 1936 section 78A

Income Tax Assessment Act 1936 section 78A(2)

Income Tax Assessment Act 1936 section 78A(2)(a)

Income Tax Assessment Act 1936 section 78A(2)(b)

Income Tax Assessment Act 1936 section 78A(2)(c)

Income Tax Assessment Act 1936 section 78A(2)(d)

Reasons for decision

Question 1

Summary

The modified car is property for the purposes of section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) as it is property under the ordinary meaning of the word.

Detailed reasoning

No definition of property in Income Tax Assessment Act 1936 or Income Tax Assessment Act 1997, therefore takes on its ordinary meaning. Macquarie dictionary defines property as:

That which one owns, the possession or possessions of a particular owner.

Ownership, right of possession, enjoyment, or disposal of anything, especially of something tangible.

The modified car comes within the ordinary meaning of property. Therefore it is a property for Section 30-15 purposes.

Question 2

Detailed reasoning

The income tax assessment acts do not prohibit the donating of any property to a charity. What the acts do is in certain circumstances allow a tax deduction for the value of the donation.

Therefore, you are not prohibited from donating the modified car to the charitable trust set up for your child.

Question 3

Summary

The taxpayer is not entitled to claim a deduction under subsection 30-15(1) of the ITAA 1997 for donating the car to the charity, because they receive material benefits from the donation.

Detailed reasoning

Question 3

Summary

The taxpayer is not entitled to claim a deduction under subsection 30-15(1) of the ITAA 1997 for donating the car to the charity, because they receive material benefits from the donation.

Detailed reasoning

Division 30 0f the Income Tax Assessment Act 1997 (ITAA 1997) deals with the deductibility of gifts or contributions.

A deduction is subject to the following conditions:

the donation must truly be a gift in that it is voluntary and it does not provide a material benefit to the donor, such as, raffle tickets;

It must be made to a deductible gift recipient;

If it is a gift of money, it must be of $2 or more; or

If it is a gift of property, further conditions contained in Division 30 of the ITAA 1997 must be satisfied.

The additional conditions that a gift of property must satisfy to be deductible are:

The property must have been purchased by you in the 12 months prior to making the gift, or

The property must be valued by the Commissioner at more than $5000.

There are further conditions if the property are shares I a listed public company, which are not relevant to your situation.

It is acknowledged from the facts provided with the ruling request, that conditions 2,3, and 4 will be satisfied. Therefore, in order for the donation to give rise, to a tax deduction under Division 30 of the ITAA 1997, it only needs to be determined whether the donation is truly a gift.

Taxation Ruling TR 2005/13 explains the term gift for Division 30 of the ITAA 1997 purposes.

The ruling states in paragraph 12 that as the term 'gift' is not defined in the ITAA 1997 it has its ordinary meaning.

Paragraph 13 goes on to say that the courts have not defined the term, but have described a gift as having the following characteristics and features. If there is a transfer of the beneficial interest in the 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

Paragraphs 16-19 of TR 2005/13 - The making of a gift to a DGR involves the transfer of a beneficial interest in property to the DGR. The 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, a gift deduction will not arise.

In your case it is considered the DGR does not have full control of the donated vehicle, as it will not only be used in the find raising activities but also to transport your child e.g. to medical appointments. Hence, the gift/donation does not have this characteristic.

Transfer is made voluntarily.

Paragraph 23 of TR 2005/13 states:

'In order for transfer of property to be a gift it must be made voluntarily, that is, it must be the act and will of the giver, and there must be nothing to interfere with or control the exercise of that will.

This characteristic arises out of case authorities such as Cyprus Mines Corporation v FC of T 78 ATC 4468; 9ATR 33.In your case it is considered the transfer of the car to the DGR was made voluntarily.

Arise by way of benefaction

Paragraphs 27-28 of TR 2005/13 state that the intention benefaction is an important characteristic of a gift. Conferring benefaction means that the DGR is advantaged without any countervailing detriments, obligations, disadvantages or limitations.

Where the giver is aware at the time of transfer of any detriments, disadvantages, obligations, liabilities or limitations, at the time of transfer, the attribute of benefaction may be missing and no deduction allowable (Section 78(2)(a) of the ITAA 1936).

The detriment etc if immaterial will not effect whether the transfer is a gift. It is considered in line with example 32 in paragraph 120 of TR 2005/13 that the upkeep e.g. running costs of property donated are immaterial obligations, which will not affect the benefaction intention.

No Material benefit or advantage

Where the giver is aware that the transfer of property will result in material benefit by way of return to the giver, this will disqualify the transfer as a gift.

Paragraph 37 of TR 2005/13 states the giver of the gift must not receive any material benefit from the making of the gift.

In this case it is considered you, the giver receives a benefit from the gift. The benefit being

you still have the use of the vehicle to transport your child.

The running costs of the car will now be paid for from funds raised by the DGR and

The car will be used to find raise to help cover the costs of your child's needs.

Note: Subsection 78(3) of the ITAA 1936 deems a benefit to be received by the giver or an associate of the giver where the giver returns the right to use the donated property under the terms and conditions of the transfer.

Although in your case there may not be expressed transfer conditions, the reality is the vehicle is still being used directly for the transportation of Sarah, as it would be if not donated.

It is considered the benefits received are material and hence the required characteristic of no material benefit is not present in the gift.

Conclusion

Two of the characteristics required for a gift to truly be a gift are not present. Therefore you are not able to claim a deduction for the donation of the car to the DGR.

Question 4

Detailed reasoning

The Commissioner accepts from the sales contract for the vehicle that its present value is more than $10,000, as the June 2011 value was $28,000.

Question 5

Detailed reasoning

No. See response to question (3) as to why a tax deduction is not allowable in your circumstances.