Private ruling: Gift Deductibility
Published: August 2013
Ruling period: Year ending 30 June 2013
Date scheme commenced: 01 July 2012

Ruling: Q1: Can the taxpayer claim a deduction for the donations of goods under subsection 30-15(1) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The taxpayer is a volunteer for an entity (the DGR) which is currently endorsed as a deductible gift recipient. The taxpayer makes regular donations of goods to the DGR. The goods are purchased by the taxpayer shortly before they make the donations. The taxpayer can provide receipts for the goods purchased. The taxpayer receives no benefit from the donations.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 30-15(1) | Income Tax Assessment Act 1997 subsection 30-15(2) ATO view document | Taxation Ruling TR 2005/13

Reasons for decision: Summary: The taxpayer can claim a deduction for the donations of goods under subsection 30-15(1) of the Income Tax Assessment Act 1997 (ITAA 1997). | Detailed Reasoning - Detailed reasoning: Division 30 of the ITAA 1997 permits deductions for certain gifts and contributions. Specifically, gift or contribution to a deductible gift recipient (DGR) will be an allowable deduction under subsection 30-15(1) of the ITAA 1997. Subsection 30-15(2) of the ITAA 1997 provides that the types of non-testamentary gifts (to the value of $2 or more) to a DGR that can be deductible include: · money; · property (including trading stock) purchased during the 12 months before the gift was made; · property valued by the Commissioner at more than $5,000; · … 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 laws 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 if 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 The taxpayer purchases goods and makes regular donations to the DGR where they work as a volunteer. The taxpayer receives no benefit from the donations. The donations are considered to be genuine donations where the taxpayer donates the goods to a DGR voluntarily with no material benefit or advantage. As the donated goods satisfy the characteristics of a gift and are purchased within 12 months before the donations, they are deductible under subsection 30-15(1) of the ITAA 1997.