Edited version of your written advice

Authorisation Number: 1012693484392

Ruling

Subject: Receipt for Donation of Barter Dollars to a Deductible Gift Recipient

Question 1

Can you issue receipts for gifts pursuant to sub-section 30-228(1) of the Income Tax Assessment Act 1997 (ITAA 1997) for donations in the form of 'Barter Dollars' through a 'Barter Company?

Answer

Yes

Question 2

Are you responsible for determining the value of the donated barter dollars, so that a receipt for a deductible gift can be issued in Australian dollars?

Answer

No. The donor of the gift of property is responsible for determining the value of the gift.

This ruling applies for the following period:

Year ending 30 June 2015

The scheme commences on:

1 July 2014

Relevant facts and circumstances

A potential donor has contacted you showing interest in donating some Barter dollars to assist your purpose.

You requested a private ruling regarding your ability to issue a receipt under sub section 30-228(1) of the Income Tax Assessment Act 1997 (ITAA 1997) for the Barter Dollars made by the persons through a Barter Company.

You are endorsed a deductible gift recipient (DGR) under Division 30 the ITAA 1997.

You included the ATO leaflet Bartering and Barter Exchanges NAT9748.8-2003 with your ruling request.

The Barter Transaction

The Barter Company is a member-only organisation which uses credit units of barter dollars as the medium of exchange. The Barter Company provides its members with a trading account for the purpose of recording member transactions. It credits or debits the account each time a member makes a sale or purchase respectively. The account is also debited for fees the trade exchange charges its members. The Barter Company may buy and sell in its own right, acting as a member with its own trading account. The value of Barter dollar can be expressed in Australian currency as there is a fixed exchange rate.

The Public Ancillary Fund

The way to donate the Barter dollars is for both the potential donor and recipient organisation to each open an account with the Barter Company. The potential donor can then donate by transferring the Barter dollars to a Public Ancillary Fund endorsed as a DGR which will in turn transfer the Barter dollars into the DGR's account. Barter dollars can be used to purchase goods or services by paying suppliers who are members of the Barter Company and who hold a Barter account.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 30-15

Income Tax Assessment Act 1997 section 30-45

Income Tax Assessment Act 1997 sub section 30-228(1)

Income Tax Assessment Act 1997 section 50-5

Reasons for decision

Issue 1

Question 1

Summary

Barter dollars transferred to you will be a gift. You may issue a receipt pursuant to sub section 30-228(1) of the ITAA 1997 to a donor who transfers Barter dollars to you.

Detailed reasoning

Deductible gift recipients may issue receipts for gifts received but they are not required to do so by the income tax legislation.

Sub section 30-228(1) of the ITAA 1997 states that if a deductible gift recipient (DGR) issues a receipt for a gift, the receipt must state:

• the name of the fund, authority or institution receiving the gift

• the ABN of the deductible gift recipient and

• the fact that the receipt is for a gift.

Other useful information for donors which might be included on a receipt is:

• the date the gift was made

• the amount of the gift if it was money

• a description of the gift if it was property.

For the purposes of Division 30 of the ITAA 1997, the word 'gift' is not defined in the ITAA 1997. The word 'gift' has its ordinary meaning, as discussed in case law (Federal Commissioner of Taxation v. McPhail (1968) 117 CLR 111 41 ALJR 346, Klopper & Anor v. FC of T 97 ATC 4179) and in Taxation Ruling TR 2005/13 Income tax: tax deductible gifts - what is a gift.

Paragraph 13 of the TR 2005/13 identifies the characteristics and features which the courts have used to describe a gift:

• 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

The making of a gift to a DGR involves the transfer of a beneficial interest in property to that DGR. For there to be a transfer, the property which belonged to the giver must become the property of the DGR. It is a requirement that identifiable property has in fact been transferred to the DGR. For a gift to be valid and effectual, the giver must have 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.

In order to determine whether there is a transfer of a beneficial interest in property, it is necessary to determine whether the transfer involves property.

How this applies to you

Although the Barter dollars are not considered to be cash, it is something that has a value, hence it is considered to be property. The donor will transfer the Barter dollars to your account through the Barter Company and the Public Ancillary Fund. As a result, you will receive tradeable benefits in the form of the Barter dollars when the actual transfers occur.

Transfer made voluntarily

In order for a 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 (Cypus Mines Corporation v FC of T (1978) 9 ATR 33). A transfer is not made voluntarily if it is made for consideration or because of a prior obligation imposed on the giver by statute or by contract.

How this applies to you

The Barter dollars transferred to you will need to be transferred voluntarily, i.e. the transfers are not made for consideration nor because of a prior obligation imposed on the giver by way of statute or contract.

Arises by way of benefaction

The essential idea of a gift is that there is a conferral of benefaction on the recipient. Deane J in Leary v FC of T 80 ATC 4438; (1980) 11 ATR 145; (1980) 32 ALR 221 explained this at 80 ATC 4453-4454 and 11 ATR 163:

It involves, in my view, the concept that the relevant transfer is by way of well doing in that the recipient will be advantaged, in a material sense and without any countervailing material detriment arising from the circumstances of the transfer, to the extent of the property transferred to him.

How this applies to you

The potential donors who transfer Barter dollars to you intend to benefit you. Therefore, the Barter dollars transferred to you will be by way of benefaction.

No material benefit or advantage

The receipt of a material benefit by way of return to the giver will disqualify the transfer as a gift (FC of T v. McPhail (1968) 117 CLR 111). Deane J in Leary at 164 said that an obvious example where a material benefit or advantage is received by way of return is where the transfer is made 'in return for valuable consideration received by the transferor from the transferee'. Brennan J in Leary also expressed that where a giver is found to have received a material benefit in return for a purported gift, it is not necessary that the material benefit comes directly from the recipient of the property transferred.

How this applies to you

Donors should not receive any benefit or advantage from you upon the transfer of the Barter dollars, so no material benefit or advantage can be received by way of return to the donors from you.

Conclusion

Barter dollars transferred to you by a donor will be in the nature of a gift, provided they are transferred voluntarily and the donor does not receive any benefit or advantage from you in exchange for the donation.

You may issue a receipt pursuant to sub section 30-228(1) of the ITAA 1997 for a gift of Barter dollars transferred to you.

Question 2

Summary

The donor of a gift of property is responsible for determining the value of the gift for the purpose of issuing a receipt from a deductible gift recipient.

Detailed reasoning

The type of gifts and the value of gifts able to be income tax deductible to donors are set out in the Table in section 30-15 of the ITAA 1997.

Gifts of property to a deductible gift recipient may be tax deductible. Testamentary gifts (gifts made under a will) are not deductible.

'Property' has a wide meaning. As well as physical things such as land and objects, it includes rights and interests that can be owned and have a value such as shares, ownership rights and barter dollars.

It is up to the donor, not the DGR, to find out the value of the gift. The donor is the person who may claim an income tax deduction for their donation of a gift to a DGR and the donor is responsible for proving that the amount claimed as a deduction is the correct value of the gift.

If the gift is property and the donor purchased the property during the 12 months before donating it and the value of the gift is $2 or more, the donor can claim a tax deduction for lesser amount of either: the market value of the property of the day the gift is donated or amount the donor paid for the property (items 1 and 2 of the table in section 30-15 of the ITAA 1997).

If the gift is property valued at more than $5,000 and the donor did not purchase the property during the 12 months before donating it, the donor can claim a tax deduction for the amount valued by the Australian Taxation Office (items 1 and 2 of the table in section 30-15 of the ITAA 1997).

The value of a Barter donation must be expressed in Australian currency and you may refer to the exchange rate for Barter dollars into Australian dollars which is published by the Barter Company.