Private ruling: Eligibility to issue a receipt for tax deductible gifts
Published: November 2013
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Q1: Is the entity entitled to issue a receipt pursuant to section 30-228 of the Income Tax Assessment Act 1997 (ITAA 1997) on the basis that it has received a gift of money of $2 or more as per item 1 of the table in section 30-15 of the ITAA 1997 in relation to donations made to the entity from individuals to participate in the Project? | A1: Yes.

Relevant facts and circumstances: The entity is a Deductible Gift Recipient (DGR) covered by Item I of the table in section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) The Project The entity will invite the public to donate money to them by participating in the Project. The donor will receive official recognition for the donation. This recognition is effected by the donor having their details published at an online location. The recognition is virtual (i.e. it exists purely online in an electronic environment). The entity will seek monetary donations for the Project by: a) offering ticket buyers an option to donate to the Project at the time of the ticket sale; b) marketing to domestic and international visitors of the entity; and c) marketing online through social media. The Project will be launched at the beginning of mm/yyyy. The entity intends for the project to create awareness of the entity as a philanthropic organisation and to educate the public, nationally and internationally, on the entity's need for funding. The donation process is as follows: · a donor will donate an amount per online location recognition; · donors will receive recognition on the online location for up to 10 years from the date of purchase:; · the donor may create the online recognition through physical as well as digital channels (for example, onsite at the Box Office or through a tablet located at the entity's premises); · the donor will be able to connect with the online location through a digital interface; · the donor can upload a photograph to their online location, to be seen by others or choose from a selection of images provided; · the donor can upload up to X characters to the online location (for example, a message noting what the entity means to the donor); and · the donor can share the online recognition with others on social media. The donors will not be able to use the online location for the promotion of the donors own activities, company or business. The entity intends for the donation to the project to be personal and non-business related. The will retain the right to moderate the uploading of images and wording on the online location. The donor will provide the entity certain data at the time the donation is made. The data collected from each donor will not to be used by parties other than the entity. The entity will issue the individual donor with a tax receipt at the time of donation. The entity is not required to incur substantial expenditure to provide the online location to the donor. Any photographs uploaded by the individual donor to the online location will remain the property of the donor. The entity will not issue any tax deductible invoices to the donor for the uploaded photographs

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 30-15 | Income Tax Assessment Act 1997 Subsection 30-228

Reasons for decision: Summary: Sub-section 30-228(1) of the ITAA 1997 states that if a deductible gift recipient (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 entity is item 1of the table in section 30-15 of the ITAA 1997. In addition the publication GiftPack (NAT 3132) outlines additional information that could be included on the receipt that would be useful to donors. They are: · the amount of money donated · a description of any gifts of property and · the date of the gift. Item 1 of the table in section 30-15 of the ITAA 1997 outlines the type of gifts that can be received. They include money, property purchased during the 12 months before the gift was made and property valued at more then $5,000. The entity is seeking confirmation that the gifts received from individual donors under the proposed specific project are gifts of money. This can be determined by considering the features of a gift. | Detailed Reasoning - A gift of money: The individual donors will donate an amount per recognition on the online location. 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 (TR 2005/13). 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: …its 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. TR 2005/13 identifies the characteristics and features which the courts have used to describe a gift. It states them at paragraph 13 as: · that 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 individual donor will transfer money to the value of an amount to participate in the Project. 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 participate in the Project is made voluntarily by the individual donor and not as a result of any contractual obligation to transfer it. The transfer of money is voluntary and therefore this criterion is 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. Individual donors who transfer money to the entity to participate in the project intend to benefit the entity. It is accepted that there will be no countervailing detriment arising from the transfer for the entity. Therefore, it is accepted that monies transferred to the entity 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 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 provide public recognition and acknowledgement to the donors. Paragraph 186 provides the following explanation: The public recognition accorded to givers will commonly not be a material benefit. This includes mere acknowledgement in newsletters, annual reports, on a donors' board, and so on. As Bowen CJ said in Leary , 'a man may, by his gifts, gain fame or formal honours without losing his tax deductions'. As discussed in the examples from paragraph 188 to 190 of the TR 2005/13, public acknowledgement and recognition for the givers' generosity by engraving their names on a plaque to be placed on the wall does not constitute a material benefit or advantage to the givers. However, on the other hand, paragraph 192 of TR 2005/13 states: Recognition accorded to the giver for purposes of commercial advertising is a material benefit. Sponsorships of DGR's by commercial entities generally fall within this category. Such outgoings, however, may be income tax deductible as business expenses. Paragraph 43 of TR 2005/13 specifically lists benefits or advantages which are not considered to be a material benefit or advantage. They are stated as: · one that has no link to the transfer; · one that is significant in relation to the value of the transfer; · one that only constitutes advertising for the DGR; · one that cannot be put to use and is not marketable; · one that does not carry any rights, or confer any privileges or entitlements; · one that merely accounts for the use of the funds; · one that is merely public recognition of the giver's generosity; or · one that confers membership of a DGR which was neither sought nor known by the giver at the time of making the transfer. Under the arrangement the donors obtain the following benefits from their benefaction: · the ability to participate in the Project which will provide official public recognition for their donation by having their details published on the website operated by the entity; · recognition of the online location may last for up to 10 years from date of purchase; · Photos and messages may be downloaded to the online location. However, they will not be able to use the online location to promote their activities, company or business. The entity has the ability to filter what information a donor uploads onto the online location to prevent self promotion or promotion of their company or business. The Project attracts individual donors to participate in a fundraising appeal by donating an amount and in return, the donors will receive online recognition for their contributions. It is quite clear that the online location is only a form of recognition to acknowledge their participation and generosity. Similar to the 'engraving' examples, the provision of the online location is simply to acknowledge the donors' generosity, and does not constitute a material benefit or advantage. The ability of an individual donor to upload their name and other details does not amount to a material benefit. Additionally, the ability of the individual donor to share their recognition via social media does not amount to a material benefit to the donor. However, as per paragraph 192 of TR 2005/13, there may be a material benefit where non individuals donate to the Project and the business or entity name is placed on the online location. | Detailed Reasoning - Conclusion of whether donations to the Project meet the criteria to be a 'gift': In this instance, the arrangement is primarily to create awareness of the entity as a philanthropic organisation and to educate the public, nationally and internationally, on the entity's need for funding. The individual donors receive public recognition on their online location and raise awareness about the activities and purpose of the entity. The amount paid to participate in this project by individual donors satisfies each of the characteristics of a gift per paragraph 13 of TR 2005/13, as the individual donors would pay/transfer the pledged amount to the entity voluntarily and the entity will receive the benefit of this Project by obtaining that money. The individual donor merely receives public recognition for their donation to participate in the Project which is not considered to be a material benefit as per paragraph 43 of TR 2005/13.