Private ruling: Donations
Published: November 2011
Ruling period: Year ending 30 June 2012 Year ending 30 June 2013
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to claim a deduction for a donation made to an entity where the funds are used to pay the travel expenses relating to a research project undertaken by a PhD student? | A1: Yes. | Q2: Are you entitled to claim a deduction for a donation made to an entity where the funds are used to pay for the publication costs relating to a research project undertaken by a PhD student? | A2: Yes.

Relevant facts and circumstances: You are a professional Your responsibilities include the conducting of research. An entity has set up a scholarship scheme to fund PhD students to carry out research. You intend to donate funds to the entity which is endorsed as a Deductible Gift Recipient (DGR). You wish to provide funds to pay for: · the travel expenses of the PhD student to undertake project related research at another location and present research results at conferences, and · the publication charges incurred in publishing the PhD student's research results. The entity has absolute discretion in relation to the use of the funds. The PhD student and the entity have the intellectual property rights to any research findings. Your reasons for making the donation is that you believe you have a moral obligation to provide funds to support research in the pursuit of knowledge.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 78A Income Tax Assessment Act 1997 Section 30-15 Income Tax Assessment Act 1997 Section 30-25

Reasons for decision: Summary: You are eligible to claim a deduction for donations to the entity to fund a PhD student's research project related travel expenses and the cost of publishing their research project results. | Detailed Reasoning - Detailed reasoning: Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997) outlines the guidelines for the deductibility of gifts and donations. Section 30-15 of the ITAA 1997 provides that a gift to any funds or institutions listed is allowable as a deduction in the financial year in which the gift is made, provided the gift meets the various conditions of the relevant subsections. To be able to claim a tax deduction for a gift, it must: o be made to a deductible gift recipient (DGR) o be a gift of money or property that is covered by a gift type, and o be truly a gift. | Detailed Reasoning - Deductible gift recipient: Only gifts made to a DGR are tax deductible. Division 30 of the ITAA 1997 provides that a taxpayer will be able to claim a deduction for a gift or contribution made during the year to nominated funds (including prescribed private funds), authorities, institutions or specified persons. The entity is an endorsed DGR under section 30-25 of the ITAA 1997. | Detailed Reasoning - Be a gift of money or property that is covered by the gift type: To obtain an allowable tax deduction for a gift of money under Division 30, the value of the gift must be more than $2, and made to a DGR. Your donation will meet this condition providing the value of the donation is in excess of $2, and the funds are being donated to the DGR. | Detailed Reasoning - A true gift: Taxation Ruling TR 2005/13 explains what constitutes a gift. The term 'gift' is not defined in the ITAA 1997 and so, for the purposes of Division 30, it has its ordinary meaning. The courts have described a gift as having the following characteristics and features: · there is a transfer of money or 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. If a transfer fails one or more of these attributes, the transfer will not ordinarily be considered a gift. | Detailed Reasoning - Transfer of property: Paragraphs 61 and 62 of TR 2005/13 states that the making of a gift to a DGR involves the transfer of money or property to that DGR. In the simplest cases, this involves the delivery of money or goods to the DGR. It is necessary to ascertain whether a transfer has occurred, what property has been transferred and when the transfer took place. This is to ensure that ownership of identifiable property has been divested and has been transferred to the DGR. You will donate money to a scholarship program to fund research. Therefore, you satisfy this requirement as you intend to donate money to the DGR. | Detailed Reasoning - Transfer made voluntarily: Voluntarily is a term which describes a giver's act as being of their own will or choice with no consideration or prior obligation imposed. Paragraph 92 of TR 2005/13 states the case authorities make it clear that for a transfer of property to be a gift it must be made voluntarily. A transfer will be voluntary if it is the act and will of the disposer and there was nothing to interfere with or control the exercise of that will. A transfer is not made voluntarily 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. You are under no obligation to provide funds to the entity to assist in the funding of research programs. The decision to make the gift has been made by you voluntarily. | Detailed Reasoning - Arises by benefaction: 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 the 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. The benefactor in this case will be the entity. The entity will be advantaged by receiving the gift without any material detriment. You are aware that the entity will be free to enjoy the gift. | Detailed Reasoning - Material benefits: In order to constitute a gift, the giver must not receive a benefit or 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 the transfer falls within the provisions of section 78A of the Income Tax Assessment Act 1936 (ITAA 1936). Section 78A of the ITAA 1936 is designed to support the integrity of the gift deduction provisions. It contains anti-avoidance provisions and aims to ensure that 'the benefit to the fund will equal the deduction allowed to the taxpayer' ( Bray v. FC of T 77 ATC 4339, (1977) 7 ATR 780). Where the funds are donated and the entity makes a decision to allocate the funds to the research undertaken by the PhD student as part of the scholarship program to be used for travel or publication purposes, there is no material benefit to you as you are not undertaking the travel and it is the student's results being published. The only material advantage experience by you will be the possible tax deduction received in financial year, if the donation is made. Paragraph 35 of TR 2005/13 states that a motive of seeking a tax deduction does not, by itself, disqualify a transfer from being a gift. As you or an associate will not receive any benefit from the gift section 78A of the ITAA 1936 will not apply. You are eligible to claim a deduction for donations to the entity to fund the travel related research expenses of a PhD student undertaking a scholarship program and the cost of publishing the research program results.

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