Private ruling: Deductibility and market value of a motor vehicle
Date of advice: 5 September 2017
Published: September 2017
Ruling period: 1 July 2013 to 30 June 2014
Date scheme commenced: 2013

Ruling: Q1: Is the donation of a vehicle to a deductible gift recipient (DGR) deductible by the Applicant under Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes | Q2: Will the Commissioner provide a valuation as to the market value of the vehicle at the time it was donated? | A2: Yes

Relevant facts and circumstances: 1. In early 201X the Applicant acquired a motor vehicle (The Vehicle). 2. The Vehicle was a van which is not ordinarily available in Australia. 3. The Vehicle was designed specifically for the transport of a disabled person. The Vehicle was used by the Applicant until early- mid 201X. 4. Attempts by the Applicant to sell the vehicle on a relevant car sales website were unsuccessful. 5. In mid-late 201X, the Applicant made contact with the Recipient. 6. The Recipient cares for students with disabilities. 7. The Vehicle was loaned to the Recipient, and they were able to evaluate the suitability of the Vehicle and found it useful for transporting their students. 8. In mid-late 201X the Applicant executed a transfer of registration of the Vehicle to the Recipient. A copy of the transfer documentation has been provided by the Applicant. The Applicant did not receive any material benefit in return for the Vehicle. 9. The Recipient is endorsed as a deductible gift recipient (DGR). 10. The Applicant did not claim a deduction for the value of the donated Vehicle for the year ended 30 June 201Y. This was due to the difficulty in determining the market value of the Vehicle due to its special nature. 11. The Applicant is not confident in determining the market value of the Vehicle due to it having significant modifications and no similar vehicle being available in Australia, and has requested the Commissioner provide a retrospective valuation of the Vehicle, at the Applicant's expense.

Relevant legislative provisions: Income Tax Assessment Act 1936 paragraph 78A(2)(c) | Income Tax Assessment Act 1997 Division 30 | Income Tax Assessment Act 1997 section 30-15, item 1 | Income Tax Assessment Act 1997 subsection 30-45(1) | Income Tax Assessment Act 1997 subsection 30-25(1) | Income Tax Assessment Act 1997 subsection 30-17(2) | Income Tax Assessment Act 1997 section 30-212

Reasons for decision: Summary: Division 30 of the ITAA 1997 provides that the types of gifts (to the value of $2 or more) to a DGR that can be deducted include gifts of property. As set out in Paragraphs 12 and 13 of Taxation Ruling TR 2005/13 - Income Tax: tax deductible gifts - what is a gift , the term 'gift' is not defined in the ITAA 1997. For the purposes of Division 30 of the ITAA 1997 the word 'gift' has its ordinary meaning. The courts have described a gift as having the following characteristics: ● 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. To determine if a transfer is a gift it is necessary to consider the whole set of circumstances surrounding the transfer. | Detailed Reasoning - Transfer of beneficial interest in property: The making of a gift to a DGR involves the transfer of a beneficial interest in property to that DGR. It is a requirement that identifiable property has in fact been transferred to the DGR. As set out in TR 2005/13, for there to be a transfer, the property which belonged to the giver must become the property of the DGR. A gift is effectual only where the giver has done everything that is necessary, in accordance with the relevant laws governing the transfer of that kind of property, to transfer ownership to the DGR. In this regard, the Applicant has transferred ownership of the Vehicle to the Recipient and has provided the requisite documentation to demonstrate this. A beneficial transfer of the property has thus taken place. | 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. However, a transfer made under a sense of moral obligation is still made voluntarily. A transfer is not made voluntarily in a case where the giver is offered a choice of making a purported gift to the DGR where: ● the choice is offered as an alternative to discharging or reducing the giver's contractual obligation to the DGR or an associate of the DGR; and ● the choice, once exercised, has the effect of discharging or reducing the giver's contractual obligation owed to the DGR or associate of the DGR. A transfer is not made voluntarily in a case where the purported gift to a DGR made by the giver has the effect of discharging or reducing a prior contractual obligation of the giver's associate. Based on the information provided by the Applicant, the transfer of the Vehicle to the Recipient was made voluntarily and there is nothing in the facts to suggest otherwise. | Detailed Reasoning - Arises by way of benefaction: An essential attribute of a gift is that benefaction is intended, and in fact conferred on the recipient. Conferring benefaction means that the DGR is advantaged in a material sense, to the extent of the property transferred to them, without any countervailing detriment arising from the terms of the transfer. Where the giver is aware that the transfer of property will result in detriments, disadvantages, obligations, liabilities or limitations to the recipient, the attribute of benefaction may be missing. Whether benefaction is in fact conferred will depend to a large extent on the proportion which the detriment, disadvantage, obligation, liability or limitation bears to the value of the property transferred. However, detriments, disadvantages, obligations, liabilities, or limitations borne by the recipient which are not within the knowledge and intention of the giver at the time of the transfer, and which do not arise from the terms of the transfer of property by the giver, do not necessarily preclude a finding that the conferral of benefaction was associated with the transfer. Detriments that are immaterial in comparison with the value of the transfer will not preclude a finding that the transfer arises from benefaction. In this instance, the Applicant has given the Recipient an opportunity by lending it the Vehicle for a period of time in order to evaluate its usefulness. It was the intention of the Applicant to confer benefaction on the Recipient. Although taking ownership of the Vehicle would result in further costs to the Recipient, these costs are immaterial in comparison to the value of the Vehicle, both monetary and in terms of convenience in transporting students with disabilities. As such, benefaction has been conferred on the Recipient. | Detailed Reasoning - No material benefit or advantage: 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 ITAA 1936. As well as any benefit or advantage received as a result of or in connection with a transfer of property, paragraph 78A(2)(c) of the ITAA 1936 also refers to any right or privilege (apart from the tax deduction that may be allowable) that the giver or giver's associate may receive as disqualifying the transfer from being a gift. 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. Only advantages or benefits that are material will disqualify a transfer of property from being regarded as a gift. It is a question of fact in each case whether any benefit or advantage is considered material. A benefit or advantage can be material if there is a link between the benefit and the transfer, and the benefit is sufficiently significant in relation to the value of the transfer. In the present circumstance, the Applicant has not received a material benefit or advantage in return for donating the Vehicle to the Recipient. | Detailed Reasoning - Conclusion: As a result of the donation of the Vehicle by the Applicant having all the characteristics of a gift, the rules for working out deductions for gifts under Division 30 of the ITAA 1997 can apply. Section 30-15 item 1(d) of the ITAA 1997 allows a tax deduction to donors for gifts of property valued by the Commissioner at more than $5000 and made to certain funds, authorities and institutions where: a) the fund, authority or institution must be in Australia; and aa) the fund, authority, or institution must either meet the requirements of section 30-17 or be mentioned by name in the relevant table item in Subdivision 30-B; and b) the value of the gift must be $2 or more; and c) any conditions set out in the relevant table item in Subdivision 30-B must be satisfied; and d) if the property is valued by the Commissioner - the requirements of section 30-212 are satisfied. Based on information provided by the Applicant, the Recipient is in Australia and the value of the gift is more than $2. Subdivision 30-B outlines who can be recipients of deductible gifts. As required by subsection 30-17(2) of the ITAA 1997, a search of the Recipient on the Australian Business Register (ABR) shows that the Recipient is endorsed as a DGR. As required by section 30-212 the Applicant has sought a valuation of the gift from the Commissioner and has paid the fees for the valuation. Thus the donation of the Vehicle by the Applicant will be deductible by the Applicant under section 30-15 item 1(d) of the ITAA 1997, the market value of the Vehicle at the time it was donated, is deductible by the Applicant. | Detailed Reasoning - Question 2: Section 30-15 item 1 of the ITAA 1997 states that if the gift is property the amount you can deduct is the lesser of the market value of the property on the day you made the gift and the amount you paid for the property. The Commissioner has provided a valuation for the Vehicle, which was carried out by an independent valuer.