Private ruling: Gift donation
Date of advice: 6 July 2016
Published: August 2016
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a deduction for the full retail cost of a service you have donated to a deductible gift recipient (DGR)? | A1: No. | Q2: Are you entitled to a deduction for the fees levied? | A2: Yes.

Relevant facts and circumstances: You are an owner operator of a business where you own several assets that you use to produce assessable income. For the last financial year you have had a business relationship with another business. You both take clients for the other when needed and in turn will promote and generally market the other's business as well as your own. At times you have donated/gifted the use of your assets and services as a prize to several DGRs. The DGRs have provided you with a letter of support or donation in relation to the donation/gift which is used as a prize. The other business will charge you for some of their marketing expenses and time.

Relevant legislative provisions: Income Tax Assessment Act 1997, Division 30 | Income Tax Assessment Act 1936, Section78A | Income Tax Assessment Act 1997, Section 8-1

Reasons for decision: Summary: Gifts Our publication GiftPack (NAT 3132) details the conditions of when a gift is deductible. Not all gifts provided to DGRs are tax deductible. In all cases, the gift must be a gift of money or property made to a DGR and covered by one of the following: • Money • Property (including trading stock and shares) purchased during the 12 months before making the gift - irrespective of its value • An item of trading stock disposed of outside of the ordinary course of business • Property (including shares) valued by the ATO at more than $5,000 • Shares in a listed public company valued at $5,000 or less held by the donor for at least 12 months • Cultural gifts: culturally significant property (except an estate or interest in land or in a building or part of a building) accepted by the DGR for inclusion in a collection it is maintaining or establishing • Heritage gifts - places included in the National Heritage List, the Commonwealth Heritage List, or the Register of the National Estate The making of a gift to a DGR involves the transfer of a beneficial interest in property to that DGR and it is a requirement that identifiable property has in fact been transferred to the DGR. The provision of services to a DGR by a donor/volunteer does not constitute a gift, as the ordinary meaning of property does not include services. This also extends to any expenditure incurred in the course of providing the unpaid work/services, the expenditure is also not considered to be a gift. Nor is it deductable under section 8-1 if the ITAA 1997 as a loss or outgoing incurred in gaining or production assessable income. Fees levied by the other operator Expenses you necessarily incur in carrying on your business are allowable deductions under section 8-1 of the ITAA 1997. In your case we accept the fees the other business will levy meet this requirement. Conclusion You are not entitled to a deduction as a gift under division 30 of the ITAA 1997 for the full retail cost or any expenditure incurred in the course of undertaking the unpaid work/services. The donation of the prize is not considered to be a gift as there has been no transfer of money or identifiable property to the DGR as described above. Nor is that gift deductible under section 8-1 of the ITAA 1997 as a loss or outgoing incurred in gaining or producing assessable income, because the gift has been provided free of charge. The fees levied by the other business are accepted as being an allowable deduction.