Private ruling: Gift
Date of advice: 19 February 2016
Published: April 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a deduction for the donation of your property? | A1: No.

Relevant facts and circumstances: You own a property which has a mortgage attached. You are planning to donate the property to a deductible gift recipient (DGR). The DGR is planning to take over the property and mortgage.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 30 | Income Tax Assessment Act 1997 Section 30-15 | Income Tax Assessment Act 1936 paragraph 78A(2)(c)

Reasons for decision: Summary: Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997) outlines the guidelines for the deductibility of gifts and donations. Section 30-15 of the ITAA 1997 provides that a gift to any funds or institutions listed is allowable as a deduction in the income year in which the gift is made, provided the gift meets the various conditions of the relevant subsections. To be able to claim a tax deduction for a gift, it must: • be made to a DGR • be a gift of money or property that is covered by a gift type, and • be truly a gift. Taxation Ruling TR 2005/13 explains what constitutes a gift. The term gift is not defined in the ITAA 1997 and so for the purposes of Division 30, it has its ordinary meaning. The courts have described a gift as having the following characteristics and features: • there is a transfer of money or 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. If a transfer fails one or more of these attributes, the transfer will not be ordinarily considered a gift. | Detailed Reasoning - Material Benefits: Section 78A of the Income Tax Assessment Act 1936 (ITAA 1936) provides the circumstances where a gift to a DGR will not be an allowable deduction. In order to constitute a gift, the giver must not receive a benefit or an advantage of a material nature by way of return. It does not matter whether the material benefit or advantage comes from the DGR or another party. Any benefit that is received (or is reasonably expected to be received) by an associate of the giver has to be taken into account in determining whether a transfer falls within the provisions of paragraph 78A(2)(c) of the Income Tax Assessment Act 1936 (ITAA 1936). It is a question of fact in each case whether any benefit or advantage is considered material. Paragraph 44 of TR 2005/13 states that a material benefit may occur where, as a result of the transfer, a legal obligation is eliminated or reduced. Paragraph 40 of TR 2005/13 states that the giver may still be regarded as having received a material benefit in a case where the value of the benefit to the giver is less than the value of the property transferred. In these circumstances it is not accepted that the value of the benefit received can be notionally deducted from the value of the property transferred and the net balance claimed as a gift. No part of the property transferred is considered a gift. In your case, you are planning to donate your property to a deductible gift recipient who will also be taking over the mortgage. Consequently, your legal obligation to repay the remainder of the mortgage will be eliminated and a material benefit will be obtained by you as a result of transferring the property. Accordingly, the transfer of the property will not be deductible as a gift as the transfer does not meet all the characteristics or features of 'a gift' as per TR 2005/13 and therefore for the purposes of Division 30 of the Income Tax Assessment Act 1997 .