Cultural gifts program
The Cultural Gifts Program encourages gifts of culturally significant items to public art galleries, museums and libraries by offering donors a tax deduction for the market value of the gift. Property donated under the program is exempt from capital gains tax (CGT) and the tax deduction may be spread over a period of up to five years.
The Attorney General's Department's Ministry for the Arts administers the program with advice from technical experts from relevant fields. The technical experts advise the Secretary of Attorney General's Department on the approval of valuers to participate in the program and examine donations to make sure they meet the program's requirements.
Donors can donate property in any form, other than an estate or interest in land or in a building or part of a building, including:
- Indigenous arts
- cultural artefacts
- natural and scientific materials
- film and social history pieces
They can donate property under the program to:
- the Australiana Fund
- a public library in Australia
- a public museum in Australia
- a public art gallery in Australia
- an institution in Australia consisting of a public library, a public museum and a public art gallery or of any two of them
- the Australian Government for Artbank.
With the exception of the Australiana Fund and Artbank, the recipient of the gift must be a DGR.
The property must be accepted by the DGR for inclusion in a collection it is maintaining or establishing. For Artbank, the property must be accepted by the Australian Government for inclusion in a collection maintained or being established for Artbank.
Donors that want to donate property should contact the DGR before they (or the DGR) obtain more information about the program from the Ministry for the Arts.
You can check that an organisation is a DGR by either:
When checking an organisation's details on the ABN Lookup website, look for the term Item 4 in the 'Deductible gift recipient status' section of the Current details screen. This indicates the organisation can receive gifts of property under the Cultural Gifts Program.
The example below gives sample wording on the ABN Lookup website for organisations eligible to receive gifts of property under the program.
Example – Sample wording on the ABN Lookup website
The XYZ Museum is endorsed as a DGR from 30 May 2003. ABC Town Council operates the following funds, authorities or institutions. Gifts to these funds, authorities or institutions may be deductible.
Fund, authority or institution name: ABC Town Council Public Library DGR Items 1 and 4 from 30 July 2007
Fund, authority or institution name: ABC Town Council Public Art Gallery DGR Items 1 and 4 from 30 July 2009
End of example
If an organisation such as a large public university wants to receive gifts under the program for one of its public libraries, museums or art galleries, it is not sufficient that the university is endorsed as a DGR itself. It must be separately endorsed as a DGR for the operation of the institution receiving the gift.
Your donors need to consider the following points:
- To find out how the donor gets a valuation, see How supporters get valuations.
- If they are registered for GST (or required to be registered), the GST-inclusive market value needs to be reduced by 1/11th if they would have been entitled to a GST credit. The GST-inclusive market value is worked out as if the
- donor had acquired the property at the time they donated it
- acquisition had been only for a purpose that GST credits would apply to.
- They do not need to reduce the GST-inclusive market value if they
- are not registered or required to be registered for GST
- are registered for GST but did not purchase the property in carrying on their enterprise
- acquired the property to make input taxed supplies.
- The Cultural Gifts Program has no special rules for gifts of trading stock. Therefore, the general rule applies (subject to the exceptions) to gifts of trading stock donated under the program.
- If the donor donates trading stock outside the ordinary course of their business, the stock's market value at the time of the gift will normally be included in their assessable income.
- If property is removed from trading stock but continues to be held; for example, in a private collection or for personal use, the amount included in their assessable income is the cost of the property (not its market value). The amount is assessable in the year the property stops being held as trading stock.
- If the property is later donated under the program, the general valuation rule will apply (subject to the exceptions) if the property is donated one year or more after it stops being held as trading stock.
- The gift deduction the donor can claim will be reduced, by a reasonable amount, if property is donated to a DGR without the DGR actually receiving
- immediate custody and control
- unconditional right to retain custody and control in perpetuity
- unencumbered legal and equitable title.
- The gift deduction the donor can claim will also be reduced if its use, or any of the above, is affected by an arrangement entered into as a condition of donating the property.
- They can claim deductions for gifts they make in their tax return for the income year the gift was made. Donors can be an individual, company, trust or other type of taxpayer.
- The deduction cannot add to or create a tax loss. However, they can make a written election to spread the tax deduction, see when supporters can claim.
- Gifts of property donated under the Cultural Gifts Program are exempt from capital gains tax (CGT). Therefore, any related capital gains or losses are disregarded. This rule does not apply if they or one of their associates later acquires the gift for less than its market value.
- They need to consider other income tax consequences of making a gift including
- record keeping
- tax losses
- deductions for jointly-owned property
- deductions for valuation expenses
- decline in value for gifts of depreciating assets.
Market valuation for tax purposes
Example 1 – Donations and GST credits
John, an art dealer, is registered for GST. He donates a painting from his trading stock under the Cultural Gifts Program on 7 November 2013. Its market value on that day was $2,200 (including GST).
If he had purchased the painting for $2,200 on that day, he would have been entitled to a GST credit of 1/11th. Therefore, he would have been able to claim back $200 of GST on the purchase.
As a result, the market value of John's gift for gift deduction purposes would be $2,000 (that is, $2,200 minus $200).
Example 2 – Donation of trading stock
Cynthia donates some of her trading stock, which she has had in her showroom for 18 months, to a DGR under the Cultural Gifts Program. The average of the valuations from the approved valuers is $4,000, which fairly represents market value.
As Cynthia is not registered for GST (or required to be registered), Cynthia will be able to claim a tax deduction of $4,000, if the deduction would not add to or create a tax loss.
Cynthia will also include $4,000 in her assessable income as the market value of trading stock disposed of outside the ordinary course of her business.
Example 3 – Donation of trading stock, continued
Instead of donating the item of trading stock, Cynthia removes it from her trading stock and uses it privately in her home for 14 months before donating it under the Cultural Gifts Program. She had purchased the item for $1,500.
The average of the valuations from the approved valuers is $4,000, which fairly represents market value. Cynthia will be able to claim a tax deduction of $4,000.
Cynthia will also include $1,500 in her assessable income for the income year she stopped holding the item as trading stock.
End of example
If a donor gives a culturally significant item to a public art gallery, museum or library they may be entitled to a tax deduction for the market value of the gift. Also, property donated under the program is exempt from capital gains tax (CGT).