Private ruling: Entitlement to issue a receipt for donation received.
Published: May 2013
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2012

Ruling: Q1: Is the Trustee for the trust (Trustee) entitled to issue a receipt under subsection 30-228(1) and item 2 of the table in section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to a particular payment? | A1: No. | Q2: Alternatively, if the payment is not a gift, is the event an eligible fundraising event and the payment an eligible contribution which enables the Trustee to issue a receipt under subsection 30-228(2) and item 7 in the table in section 30-15 of the ITAA 1997? | A2: Yes, if the special conditions contained at item 7 of the table in section 30-15 of the ITAA 1997 are satisfied. | Q3: If the payment is not a gift, the fundraising event is an eligible fundraising event and the payment to access the fundraising event is an eligible contribution, what is the value of the minor benefit? | A3: Decline to rule.

Relevant facts and circumstances: The entity is established under trust deed. The trust deed has been supplied. It states the entity's purpose and how it is to be operated. The entity has been endorsed as a deductible gift recipient (DGR) Event The Trustee will host a fundraising event in order to raise money to be applied to the entity's purposes. The purpose of the fundraising event is to be informative, thought provoking and entertaining, without requiring participants to travel. The cost of attending the fundraising event will allow an organization or individual (Donor) to view the event. The event will run for only a short period. Details of the fundraising event have been provided. The fundraising event will allow the entity to outline its purpose. The event will be hosted by a celebrity and involve entertainment being provided. Prior to the fundraising event, a tender will be offered to the public to attend a function with a celebrity. The largest donors will have an opportunity to take an active part in the event.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 30-15 | Income Tax Assessment Act 1997 subsection 30-228(2) | Tax Administration Act 1953 subsection 359-40(5) | A New Tax System (Goods and Services Tax) Act 1999 section 40-160 | A New Tax System (Goods and Services Tax) Act 1999 subsection 40-160(1) | A New Tax System (Goods and Services Tax) Act 1999 paragraph 40-165(1)(a)

Reasons for decision: Summary: The trustee is not entitled to issue a receipt under subsection 30-228(1) and item 2 of the table in section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to a specified payment from donors. | Detailed Reasoning - Detailed reasoning: Sub-section 30-228(1) of the ITAA 1997 states that if a DGR issues a receipt for a gift, the receipt must state the name and Australian Business Number (ABN) of the DGR and the fact that the receipt is for a gift. Importantly, to be entitled to issue a receipt for a donation, the donation must qualify as a gift as described in the relevant item of the table in section 30-15 of the ITAA 1997. The relevant table for the trustee is item 2 of the table in section 30-15 of the ITAA 1997. Relevantly, for the fundraising event, item 2 in the table in section 30-15 of the ITAA 1997 provides that the trustee will be entitled to issue a receipt under item 2 if the amount received from the donor is: (a) a gift of money; (b) the value of the gift of money is more than $2.00; (c) the terms of the trust allow the trustee to invest money that the DGR receives because of the gift only in a way that an Australian law allows trustees to invest trust money; and (d) The DGR meets the requirements of section 30-17 of the ITAA 1997. | Detailed Reasoning - A gift of money: The donor provides an amount of money in regard to the cost of accessing the event. We must consider whether this amount constitutes a "gift". 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 and its definition is discussed in case law and in Taxation Ruling TR 2005/13 Income tax: tax deductible gifts - what is a gift. For a transfer of money or property to be characterised as a gift, it should arise from benefaction and proceed from detached and disinterested generosity. This view was propounded by Owen J. in Federal Commissioner of Taxation v. McPhail (1968) 117 CLR 111 41 ALJR 346: …it is, I think, clear that to constitute a "gift", it must appear that the property transferred was transferred voluntarily and not as the result of a contractual obligation to transfer it and that no advantage of a material character was received by the transferor by way of return. In Klopper & Anor v. FC of T 97 ATC 4179, at 4184, Nicholson J also stated the following: …a payment can only be characterised as a gift when there is the element of voluntariness and the absence of consideration: that is, where there is truly a notion of benefaction so there is no advantage of a material character being received in return. 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. | Detailed Reasoning - Transfer of beneficial interest in property: Paragraphs 16 to 18 of TR 2005/13 state 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. TR 2005/13 paragraph 61 states 61. The making of a gift to a DGR involves the transfer of money or property to that DGR: section 30-15 of the ITAA 1997. In the simplest of cases this involves the delivery of money (cash, cheque or electronic transfer of funds) or goods to the DGR The facts of this case indicate that the donor will transfer money to participate in the fundraising event. This criterion is satisfied. | Detailed Reasoning - 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 ( Cyprus 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. The transfer of money is made to access the fundraising event. The Transfer of money is not voluntary and therefore the criterion is not satisfied. | Detailed Reasoning - 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. Brennan J also said at 80 ATC 4451 and 11 ATR 160: If the disponor is aware that the receipt of the property by the disponee will impose a liability upon the latter, the disposition may be seen not to be by way of benefaction…No doubt much depends upon a comparison between the property taken and the liability incurred. Donors who transfer money to the trustee to participate in the event intend to benefit the trustee. It is accepted that there will be no countervailing material detriment arising from the transfer for the trustee. Therefore, it is accepted that monies transferred to the trustee will be by way of benefaction. | Detailed Reasoning - 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. As stated above, the main issue to consider is whether the advantages or benefits are material, because the material nature of the advantages will affect whether a transfer is a gift. The requirement of materiality will exclude matters of a de minimis nature (AAT Case 12,314 Re Hodges v. FC of T 97 ATC 2158; (1997) 37 ATR 1091) TR 2005/13 discusses several circumstances on what is considered to be a material benefit or advantage. Specifically, TR 2005/13 considers whether a benefit is insignificant in comparison with the value of the transfer and the following is stated in paragraph 169: It is a question of fact in each case whether any benefit or advantage is sufficiently significant to be material. Where a benefit of utility or value is received, it will only be considered as not material if there is a considerable disproportion between the value of the transfer and the benefit received. For example, a benefit in the form of a key-ring might be immaterial when considering a transfer of $4,000 but significant for a $4 payment. TR 2005/13 also considers the situation where the DGRs undertake fundraising campaigns and offer incentives to potential donors. Specifically, paragraph 163 states: | Detailed Reasoning - Incentives offered: 163. Where the DGR's undertake fundraising campaigns, the features of the campaigns can assist in determining whether the amounts transferred to the DGR's are gifts. It may be clear from some campaigns that they do not seek to elicit gifts. Under the arrangement the donors obtain the benefit of entertainment being provided during the event. In this instance, the arrangement is primarily to provide information to participants and raise awareness about the activities and purpose of the trustee. The amount paid to participate in this event by donors satisfies two of the characteristics of a gift per paragraph 13 of TR 2005. The last characteristic is also not satisfied as the potential donors will receive a benefit or advantage (an item or items) from the trustee upon the transfer of the pledged amount. It is considered that the live entertainment provided constitutes a material benefit to the donors. There may be additional material benefits to the large donors. The tender process is not considered to be directly related to the payment by the donor to attend the event. The tender process is considered to be available to the general public and not just donors. The payment to the trustee by the donor is to participate in the Event. However, the event is being marketed with the inducement of providing entertainment to donors during the event. We do not consider this benefit as being insignificant or of a de minimis nature. Accordingly, we consider that the trustee cannot issue a receipt to donors pursuant to section 30-228(1) of the ITAA 1997 for the amount paid to attend the event by donors as it is not considered that there has been a deductible gift under item 2 in the table in section 30-15 of the ITAA 1997. As we have ruled that there is no deductible gift made, we have not considered the other conditions outlined in item 2. | Summary: The fundraising event is an eligible fundraising event. To be an eligible contribution and for the Trustee to be able to issue a receipt under subsection 30-228(2) of the ITAA 1997 and item 7 in the table in section 30-15 of the ITAA 1997, the special conditions pertaining to item 7 in the table in section 30-15 must all be satisfied. | Detailed Reasoning - Detailed reasoning: Subsection 30-228(2) of the ITAA 1997 provides that a DGR is entitled to issue a receipt for a contribution described in item 7 of the table in section 30-15 of the ITAA 1997 provided the receipt states: (a) the name of the DGR; (b) the ABN of the DGR; (c) the fact that the receipt is for a contribution made in return for the right to attend, or participate in, a specified fundraising event. (d) if the contribution is money, the amount of the contribution; and (e) the amount of the GST inclusive market value, on the day the contribution was made, of the right to attend, or participate in, the fundraising event. | Detailed Reasoning - Fundraising Event: Subsection 40-165(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) describes what is meant by a fund-raising event. This subsection states: Any of these is a fund-raising event if it is conducted for the purpose of fund-raising and it does not form any part of a series or regular run of like or similar events: (a) a fete, ball, gala show, dinner, performance or similar event; (b) an event comprising the sale of goods if: (i) each sale is for a *consideration that does not exceed $20 or such other amount as the regulations specify; and (ii) selling such goods is not a normal part of the supplier's *business; (c) an event that the Commissioner decides, on an application by the supplier in writing, to be a fund-raising event. Note that the asterisks denote a defined term in the GST Act. In making a decision to treat an event as a fund-raising event, the Commissioner must be satisfied that the organisation is not in the business of conducting such events and the proceeds from conducting the event are for the direct benefit of the organisation's charitable or non-profit purposes. The Commissioner made a determination on 10 August 2001 cited as A New Tax System (Goods and Services Tax) Frequency of Fund-raising Events Determination (No. 1) 2001 that the frequency with which fund-raising events may be held without forming part of a series or regular run of like or similar events is fifteen fund-raising events in any financial year. You have confirmed that the fundraising event will be the only event for the 2014 financial year. Where you choose to apply section 40-160 of the GST Act to a fund-raising event, you will need to make a note of your decision in your records and you will have to treat all supplies that you make in connection with the event as input taxed. | Detailed Reasoning - Event: Subsection 40-165(1) of the GST Act provides the meaning of fund-raising event. It provides that a fund-raising event is an event that is conducted for the purpose of fund-raising and does not form any part of a series or regular run of like or similar events and is one of the following: · A fete, ball, gala show, dinner, performance or similar event. Based on the information you have supplied you are conducting one event for the relevant year. You are conducting the event for the purpose of fund-raising. The term performance is not a defined term in the GST Act. It takes its ordinary meaning. In accordance with the Macquarie dictionary a performance includes a musical, dramatic, or other entertainment, the performing of ceremonies or of music or of a play, part or the like. Based on the information supplied we consider that your event is a performance or similar event as described in paragraph 40-165(1)(a) of the GST Act. We have provided our view on the operation of subsection 40-160(1) of the GST Act in the "Guide for non-profit organisations Fundraising" (Fundraising Guide). You may download the Fundraising Guide from our website at www.ato.gov.au. Chapter 2 of the Fundraising Guide outlines tax deductible contributions and the requirements for a contribution to be tax deductible. The Fundraising Guide defines eligible contributions as either: · a right to participate in a fundraising event; or · a successful bid at a charity auction conducted by a DGR. Conditions for an eligible contribution are: The contribution must be: · money over $150; · property purchased during the 12 months before making the contribution and valued at more than $150; · property valued by the Commissioner at more than $5,000; or · shares acquired at least 12 months before making the contribution and valued at $5,000 or less but more than $150; and The benefit received by the contributor must be no more than 20% of the value of the contribution or $150, whichever is the less. Additionally the contribution must comply with the relevant special conditions as set out at item 7 of section 30-15 of the ITAA 1997 which also includes that it must be made by an individual and that an individual cannot deduct more than two contributions in relation to the same fundraising event. | Detailed Reasoning - Minor benefit.: We consider that there is a benefit provided to contributors of the fundraising event. We consider the benefit to be the entertainment provided to donors. We also consider that large donors are provided with additional benefits. It is the trustee's responsibility to determine the market value of the benefit given in return for a contribution. | Summary: Not ruled upon. Valuations in respect of gifts under Division 30 are expressly excluded under subsection 359-40(5) of the ITAA 1997 as something the ATO will provide a ruling on. | Detailed Reasoning - Detailed reasoning: You have asked for a valuation of the benefit. We consider the benefit to be entertainment provided to donors. Large donors are provided with additional benefits. The Fundraising Guide provides guidelines at Chapter 2 on how to determine the value of tax deductible contributions. Specifically, page 15 details how to determine the value of a "minor benefit". It states at page 15: The DGR is responsible for determining the market value of the minor benefit given in return for a contribution. The minor benefit is valued at its 'market Value'. An assessment of the market value of a minor benefit involves making a reasonable estimate of what would be charged for the benefit on the open market, in an arm's length transaction.