Private ruling: Deductibility of gift
Date of advice: 30 April 2021
Published: July 2021
Ruling period: Income year ended 30 June 2020
Date scheme commenced: 1 July 2019

Ruling: Q1: Is the motor vehicle a gift for the purposes of subsection 30-15 of the ITAA1997? | A1: Yes

Relevant facts and circumstances: A motor vehicle was donated by the taxpayer to a Deductible Gift Recipient. The motor vehicle had the logo of the taxpayer on the side at the time of transfer. The recipient did not remove the signage from the motor vehicle. There was no Deed of Gift or similar agreement in place. There were no obligations on the recipient to keep nor remove the signage.

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

Reasons for decision: Summary: For the transfer of property from one entity to another to be 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. In this case the facts indicate that the transfer of the motor vehicle from the taxpayer to the DGR constitutes a gift under Division 30 of the ITAA 1997 as there was a transfer of beneficial interest in the property; the transfer occurred voluntarily; the transfer arose by way of benefaction and no material benefit or advantage was obtained by the giver by way of return. | Detailed Reasoning - Detailed reasoning: Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997) deals with the deductibility of gifts or contributions a taxpayer makes. For the purposes of Division 30, the term gift is not defined in ITAA 1997, therefore the term 'gift' takes its ordinary meaning and its definition is discussed in case law and in Taxation Ruling Income Tax: tax deductible gifts - what is a gift (TR 2005/13). Per paragraph 13 of TR 2005/13, the courts have described a gift as having the following characteristics and features: - 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 16-18 of TR 2005/13 state the making of a gift to a deductible gift recipient (DGR) involves the transfer of beneficial interest in the property to that DGR. For there to be a transfer, the property which belonged to the Donor must become the property of the DGR. For the gift to be valid and effectual, the Donor must have done everything that is necessary, in accordance with the relevant laws governing the transfer of that kind or property, to transfer ownership to the DGR. Paragraph 61 of TR 2005/13 states 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 (cash, cheque or electronic transfer of funds) or goods to the DGR. In this case, through the provision of transfer certificates, the taxpayer has transferred beneficial interest in the car to the DGR. | Detailed Reasoning - Transfer is made voluntarily: In order for the 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. In this case, the taxpayer decided to transfer the car to the DGR and intended it to be a surprise. There was no prior obligation or contract in place between the two parties involved, and the transfer was voluntary. | Detailed Reasoning - Arises by way of benefaction: The essential idea of a gift is that there is a conferral of benefaction on the DGR. 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. In this case the DGR is advantaged in a material sense to the extent that the property was transferred to them for their use without any countervailing detriment arising from the terms of the transfer. The gift of the motor vehicle is intended to benefit the recipient. | Detailed Reasoning - No material benefit or advantage is received by the giver by way of return: Per paragraph 37 of TR 2005/13 the Donor must not receive a benefit or an advantage of a material nature by way of return for there to constitute a gift. The receipt of a material benefit by way of return to the Donor will disqualify the transfer as a gift ( FC of T v McPhail (1968) 117 CLR 111 ). 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 around what is a material benefit or advantage. Specifically, paragraph 162 states that if there is no expectation on the recipient from the donor, then this is considered a mere unintended benefit which is not considered material. Paragraph 186 of TR 2005/13 provides a circumstance that public recognition accorded to givers will commonly not be a material benefit. This includes mere acknowledgement in newsletters, annual reports, on a donor's 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 deduction". In this case the taxpayer gifted the motor vehicle to the DGR with the signage. There was no obligation or expectation from the taxpayer for the DGR to keep the signage and the fact the DGR kept the signage on the car and then added to it is considered a mere unintended benefit for the donor. Therefore, the transfer of the motor vehicle with signage is a gift and the taxpayer can claim a deduction under Division 30 of the ITAA 1997 provided other conditions in this division are satisfied.

This ruling applies for the following period: