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Edited version of your written advice
Authorisation Number: 1051320884934
Date of advice: 15 December 2017
Ruling
Subject: Assessable income
Question
Are donations you receive on behalf of a non-government organisation (NGO) registered in a foreign country assessable under section 6-5 of the Income Assessment Act 1997 (ITAA 1997)?
Answer
No.
This ruling applies for the following period:
01 July 2017 to 30 June 2027
The scheme commences on:
01 July 2017
Relevant facts and circumstances
1. You built a website for an NGO registered in a foreign country.
2. The website outlines the NGO’s vision.
3. The website collects donations on behalf of the NGO through an Australian bank account in your name. The full amount of all donations received are then transferred to the NGO via a foreign bank account.
4. You are doing this on your own behalf, and there is no agreement, agency or otherwise, in place with the NGO.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Question 1
Are donations you receive on behalf of an NGO registered in a foreign country assessable under section 6-5 of the ITAA 1997?
Summary
Donations you receive on behalf of an NGO registered in a foreign country are not assessable income under section 6-5 of the ITAA 1997.
Detailed reasoning
Section 6-5 of the ITAA 1997 provides:
(1) Your assessable income includes income according to ordinary concepts, which is called ordinary income.
Whether donations and gifts received constitute ordinary income is a matter of fact to be determined in each case. In each case, the character of the receipt in the hands of the recipient is examined objectively to determine whether the donation or gift was made to the donee in relation to an activity or occupation that produces assessable income, or whether the donation or gift was made to the donee in relation to some personal quality or circumstance (Hayes v. Federal Commissioner of Taxation (1956) 96 CLR 47; [1956] HCA 21; Squatting Investment Co Ltd v. Federal Commissioner of Taxation (1953) 86 CLR 570; [1953] HCA 13; Scott v. Federal Commissioner of Taxation (1966) 117 CLR 514, 526; [1966] HCA 48). The former will be considered assessable income, whilst the latter will not.
In addition, the motives of the donor may be relevant, but are not decisive (Hayes v. Federal Commissioner of Taxation (1956) 96 CLR 47, 55; [1956] HCA 21). Motives for making a donation or gift can range from personal goodwill, which tends to indicate non-assessable income, to donations or gifts with a commercial motive, which tends to indicate assessable income.
In your case, the donations you receive through the website are collected for a foreign NGO, and are not related to any activity or occupation that you are undergoing to produce assessable income. You forward the full amount of all donations received through the website to the NGO so that the NGO can further the vision and programs outlined on their website.
Furthermore, it is apparent from the NGO’s website that there is no benefit, commercial or otherwise, given to donors. The fact that there is no activity or occupation that you are undergoing that produces assessable income in relation to the donations provides further evidence that there is no commercial motive for donors to give donations. Although donations will go to an Australian bank account in your name, it is clear to donors from the NGO’s website that the donations are for the NGO. Accordingly, donations are given with the NGO’s vision in mind, and are ostensibly given out of personal goodwill.
Weighing up these factors, it is concluded that the receipt of donations in your hands is not assessable income under section 6-5 of the ITAA 1997.
Case law
Hayes v. Federal Commissioner of Taxation (1956) 96 CLR 47; [1956] HCA 21
Scott v. Federal Commissioner of Taxation (1966) 117 CLR 514; [1966] HCA 48
Squatting Investment Co Ltd v. Federal Commissioner of Taxation (1953) 86 CLR 570; [1953] HCA 13