Edited version of private advice

Authorisation Number: 1052127863898

Date of advice: 9 June 2023

Ruling

Subject: Deductibility of gift or donation

Question

Will the payment of a cash donation by you to the charity be a tax-deductible gift or contribution under s 30-15 of the ITAA 1997 Act?

Answer

Yes

This ruling applies for the following period:

1 July 20XX to 30 June 20XY

The scheme commenced on:

1 July 202X

Relevant facts and circumstances

•                     You are an individual taxpayer that is a resident for Australian tax purposes.

•                     the Charity is registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC).

•                     the Charity is endorsed as a deductible gift recipient (DGR) with the Australian Taxation Office (ATO) under item 1 of the table in section 30-15 of the ITAA 1997.

•                     According to the Charity' website, it is a world leading research institute.

•                     Due to your strong interest in philanthropy and environmental issues, and the various research being undertaken by the Charity, you propose to make a cash donation to the Charity, on or before 30 June 20XY, to promote its research and causes.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 30-15

Income Tax Assessment Act 1997 Subdivision 30-B

Income Tax Assessment Act 1997 section 78A

Reasons for decision

Before assessing the deductibility of your intended cash donation, we need to establish if it constitutes a "Gift."

Is your donation considered a gift?

Taxation Ruling TR 2005/13 Income tax: tax deductible gifts - what is a gift explains the meaning of a gift for the purposes of Division 30 of the ITAA 1997.

Paragraph 12 of TR 2005/13 states that the term 'gift' is not defined in the ITAA 1997. For the purposes of Division 30 of the ITAA 1997 the word 'gift' takes its ordinary meaning.

Paragraph 13 of TR 2005/13 states that the courts have described a gift as having the following characteristics and features:

•                     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.

We have considered each of these factors below.

Transfer of the 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.

You intend to donate $Z to the Charity, so that money will be transferred to the Charity. The transfer will be funded from your existing funds. The payment will result in the Charity having immediate and unconditional right of custody and control of those funds. This requirement is satisfied.

The transfer is 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. A transfer made under a sense of moral obligation is still made voluntarily.

You stated that you due to your strong interest in philanthropy and environmental issues, and the various research being undertaken by the Charity, you are voluntarily choosing to donate the cash sum of $Z to the Charity. This sum is not a contractual obligation.

We accept that the Charity can use the funds for any purpose it chooses, including funding its own research.

You will make the transfer pursuant to the exercise of your own free will. The transfer will not be made pursuant to any legal obligation imposed on you - whether in contract or at law. The transfer will also not be in connection with the discharge of any contractual obligation owed by you to the Charity. Accordingly, we consider that the transfer will be made voluntarily.

The transfer arises by way of benefaction

A gift should intend and confer benefaction on the recipient. Benefaction means that the DGR is advantaged materially without any detriment arising from the terms of the transfer.

A gift usually proceeds from detached and disinterested generosity. Where a giver gives a gift for self-interested commercial or fiscal reasons it contradicts any objective to confer benefaction. A motive of seeking a tax deduction does not, by itself, disqualify a transfer from being a gift.

You will donate money to the Charity on a voluntary and unconditional basis. There will be no agreement in connection with the transfer that gives rise to any obligation or detriment for the Charity. the Charity will have full and unfettered discretion as to use the funds for its own charitable purposes. the Charity will not have any obligation to comply or consider your wishes or preferences. Accordingly, we consider this requirement met.

No material benefit or advantage is received by the giver by way of return

In order to constitute a gift, the giver must not receive a benefit or advantage of a material nature by way of return. Whether a material benefit or advantage has been received will be a matter of fact.

In this case, there will be a transfer of beneficial interest in the gift, the money that is yours will become the property of the Charity. The gift is a simple transfer of money, which materially benefits the Charity with no detriment. The gifting of the money has been made voluntarily by you, there was no consideration given and you are under no obligation to make the donation. There is no prior agreement in place, the decision to gift the money is purely your choice. Once the donation is transferred, it is the decision of the Charity to use it as they choose.

Relevantly, you will make a cash donation to the Charity on an unconditional and voluntary basis. There is no expectation of anything in return. The transfer will not confer any rights or entitlements to you. The donation is also not consideration for any property or services.

Therefore, we do not consider there is a sufficient link or any causal connection between the cash donation that you intend to make and any material benefit in any relevant sense. Ultimately, your motivation in making the transfer is to donate to a cause that you are passionate about.

Accordingly, we consider this requirement met, and that your intended cash donation of $5,000 will constitute a gift,

Is your gift to the Charity deductible?

Division 30 of the ITAA 1997 sets out the rules governing deductibility of gifts or contributions.

You intend to make a $Z cash donation to the Charity on or before 30 June 20XY. the Charity is an endorsed DGR by the ATO and is covered by item 1 of the table in subsection 30-15(2) of the ITAA 1997.

Subsection 30-15(1) of the ITAA 1997 provides that a gift or contribution to a fund or institution is deductible in the income year for which it is made subject to satisfying the relevant requirements set out in the table in subsection 30-15(2) of the ITAA 1997. Item 1 of that table lists the types of gifts and contributions that may be deductible, which includes a gift of money. You will make a cash donation to the Charity. Therefore, we consider this requirement met.

In addition, you must meet the following special conditions set out under item 1 of the table in subsection 30-15(2) of the ITAA 1997:

(a)          the fund, authority or institution must be in Australia; and

(aa)        the fund, authority or institution must either meet the requirements of section 30-17 or be mentioned by name in the relevant table item in Subdivision 30-B; and

(b)          the value of the gift must be $2 or more; and

(c)           any conditions set out in the relevant table item in Subdivision 30-B must be satisfied; and

(d)          if the property is to be valued by the Commissioner - the requirements of section 30-212 are satisfied.

The first special condition is that the fund, authority, or institution must be in Australia. As per the ACNC registration profile, the Charity is based in Australia. We consider this requirement to be satisfied.

The second special condition is that the fund, authority or institution must meet the requirements of section 30-17 of the ITAA 1997 or be mentioned by name in the relevant table item in Subdivision 30-B.

Paragraph 30-17(2)(a) of the ITAA 1997 states that the fund, authority or institution must be an entity that is endorsed under subdivision 30-BA as a DGR. the Charity is endorsed as a DGR. Accordingly, we consider that this requirement will be satisfied.

The third special condition is that the value of the gift must be $2 or more. You intend to make a $Z cash donation, which is greater than $2. Accordingly, this requirement will be satisfied.

The fourth special condition is that relevant table item in Subdivision 30-B must be satisfied. It is assumed that all relevant conditions will be satisfied on the basis that the Charity is endorsed as a DGR.

The fifth special condition relates to gifts in the form of property and is not applicable in these circumstances.

Accordingly, based on the above, we consider that your intended cash donation of $Z is a gift that is covered by a requisite gift type under item 1 of subsection 30-15(2) of the ITAA 1997, and it will be deductible under section 30-15 of the ITAA 1997.