Private ruling: Income tax - Deductions - Gifts/donations
Published: May 2015
Ruling period: 1 July 2014 to 30 June 2015 | 1 July 2015 to 30 June 2016 | 1 July 2016 to 30 June 2017
Date scheme commenced: 1 July 2014

Ruling: Q1: Is a payment made by you to an Australian public university, with a preference that the funds be directed to a specified institute, a tax-deductible gift or contribution under section 30-15 of the Income Tax Assessment Act 1997 ('ITAA 1997')? | A1: Yes

Relevant facts and circumstances: You are currently an unpaid research leader of a research group. The research group has been established within an institute of the university The institute is a collective of researchers at the university. The institute is not endorsed as a Deductible Gift Recipient ('DGR'). The university registered as a charity with the Australian Charities and Not-for-profits Commission ('ACNC'). The university is also endorsed as a DGR, under item 1 of the table in section 30-15 of the ITAA 1997. The research group is seeking financial support to establish a postdoctoral fellowship within the group. Your donation You wish to make a one-off monetary donation to the institute to support the fundraising appeal for the employment and support of the research fellow. Your donation will be made to the university, nominating the institute as the preferred recipient. However, there is no guarantee that the university will use the funds in the manner that you prefer. You are under no obligation of any type to provide funding to the research group. The donation is not provided to reduce or discharge any contractual obligations. The research group Currently, the research group consists of a small number of members. In your role as the research leader, you lead and work in collaboration with the other members of the research group. You are responsible to an advisory board, and ultimately the university. You undertake the role as an unpaid research leader in the research group in your own spare time. This role is not a condition of your paid employment with a third party employer. In your role as the research leader of the research group, you are not contractually required to complete specific projects or work. You have the discretion to choose the projects you deem appropriate. These projects are chosen in consultation with the other members of the research group and the advisory board. The research fellow The purpose of establishing the fellowship is to aid in the research work of the research group, as other members of the group work part time and in their spare time. The research fellow will assist in the research work, and will provide a majority of the output. The tenure of the research fellow will be dependent on the amount of funding raised, though the intention is to employ the fellow for 3 years if funding allows. The research fellow will work in collaboration with the other members of the research group, including you, on projects that are identified together by the research group and the advisory board. The research fellow will have input on the projects that he or she will work on. The research fellow will carry out several or all of critical appraisal, meta-research, preparation of teaching materials, teaching and advocacy. The research fellow will be responsible to the research group, the advisory board, and ultimately the university. Research undertaken by the research group The products of research undertaken by the research group may include: • research papers and publications; • written material, to be distributed to newspapers or blogs for the purpose of education; • teaching material, to be distributed to students or professionals. Reports and results of research work may also be published to the institute's website. You will not claim authorship for any work done by solely by the research fellow. Authorship of publications is determined by an international committee's criteria for authorship. The criteria may result in you and the research fellow, as well as any other contributors, being co-authors of a piece of work, based on each individual's contribution. Any intellectual property that may result from the work or research produced by the research group, if not owned by the university, will be apportioned based on the contribution of each research member to the research findings. Specifically, where the research fellow contributes to work or research by the research group, any intellectual property rights, not otherwise owned by the university, will be the property of the research fellow, not you, to the extent of the research fellow's contribution. In the unlikely event that there is any commercialisation of output from the research fellow, any income that is not retained by the university will go to the research fellow. As the research leader, some kudos may attach to you where the research fellow has academic achievements.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 30-15 | Income Tax Assessment Act 1997 section 30-25 | Income Tax Assessment Act 1997 Subdivision 30-B | Income Tax Assessment Act 1936 section 78A Anti-avoidance rules | N/A

Reasons for decision: Summary: We consider that your proposed donation to the university is a tax deductible gift or contribution under section 30-15 of the ITAA 1997, as it is an eligible gift type made to an endorsed DGR that has the characteristics of a gift. | Detailed Reasoning - Detailed reasoning: Division 30 of the ITAA 1997 sets out the rules for working out deductions for certain gifts and contributions. Section 30-15 of the ITAA 1997 provides that a gift or contribution to a fund or institution is deductible in the income year for which it was made, provided that it satisfies the various conditions of the relevant subsections. You intend to make a donation to a fundraising event or exercise that has connections with the university. As a result, you will be required to satisfy the conditions of item 1 of the table in subsection 30-15(2) of the ITAA 1997 in order for your donation to be deductible. Section 30-15 of the ITAA 1997 allows you a tax deduction for a donation if it is: 1. made to a DGR; 2. a gift of money or property that is covered by a gift type; and, 3. truly a gift. | Detailed Reasoning - Is your donation made to a DGR?: Division 30 of the ITAA 1997 provides a deduction to a taxpayer for a gift or contribution made during an income year to nominated funds, authorities, institutions or specified persons. Your donation will be made to the university, nominating the institute as the preferred recipient. The university will then have the discretion to distribute the funds to the institute. However, there is no guarantee that the university will use the funds in the manner that you prefer. Item 2.1.1 of the table in subsection 30-25(1) of the ITAA 1997 includes a public university. The university is an Australian public university and is an endorsed DGR. There are no special conditions attached to the making of the gift to an entity specified in item 2.1.1 of the table in subsection 30-25(1). As a result, this requirement is met. | Detailed Reasoning - Is your donation a gift of money or property that is covered by a gift type?: Item 1 of the table in subsection 30-15(2) of the ITAA 1997 lists the types of gift or contributions that are deductible, including a gift of money. The special conditions of item 1 of the table in subsection 30-15(2) of the ITAA 1997 requires that the value of the gift must be $2 or more to be deductible. You intend to make a monetary donation of more than $2. As a result, this requirement is met. | Detailed Reasoning - Is your donation a gift?: In determining whether a donation is considered a gift, Taxation Ruling TR 2005/13 Income tax: tax deductible gifts - what is a gift states, at paragraphs 13 and 14, that: 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. In doing so, the courts have recognised that the criteria may not be absolute and may involve a matter of degree. We have considered these characteristics below in relation to your proposed donation. Transfer of the beneficial interest in property The courts have established in Milroy v. Lord (1862) 45 ER 1185 at 1189; 4 De G F & J 264, at p 274, that for a gift to be valid and effectual, the giver: must have done everything which according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. Paragraph 69 of TR 2005/13 emphasises that, for there to be a tax deductible gift, the giver must have proprietary rights in the property just prior to its transfer. You will transfer a sum of money from yourself to the university, of which the university will have immediate and unconditional right of custody and control. As such, we consider that you will transfer the beneficial interest in relation to your donation. | Detailed Reasoning - Transfer is made voluntarily: The courts in Cyprus Mines Corporation v. Federal Commissioner of Taxation 78 ATC 4468 at 4481; (1978) 9 ATR 33 at 48 state that for a transfer of property to be made voluntarily, it must be "the act and will of the disponor and there was nothing to interfere with or control the exercise of that will". Your donation will be made voluntarily. In your role as the research leader of the research group, you are under no obligation or requirement to provide funding to the group. Further, you are not contractually required to complete specific projects or work as part of the research group. Providing the donation does not reduce or discharge any contractual obligation that you have to the institute or its associates. In these circumstances, we consider that the voluntary nature of your proposed donation will not been interfered with or controlled by any other factors, and so the transfer of your donation is made voluntarily by you. | Detailed Reasoning - Transfer arises by way of benefaction: The courts in Leary v. Federal Commissioner of Taxation [1980] FCA 112; 80 ATC 4438 at 4453-4454; (1980) 11 ATR 145 at 163 explain that for the transfer to arise by way of benefaction, benefaction must be conferred from the giver to the recipient, and 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. Paragraph 31 of TR 2005/13 states: Transfers of property which are made to a DGR on condition that the property in turn will be transferred to a second entity raise concerns as to whether benefaction has been conferred on the DGR. If the effect of the condition is that the DGR is merely an agent or trustee to pass the transferred property on to another organisation, it is evident that no benefaction will in fact be conferred on the DGR itself. However, paragraphs 132 and 133 of TR 2005/13 consider that, where property is transferred to a DGR with a preference that the property be in turn transferred to a second entity, a conferral of benefaction will arise where: • the DGR receives the property in its own right; and • the DGR has an unfettered discretion in deciding whether or not to apply the property in accordance with the preference expressed by the giver. Paragraph 34 of TR 2005/13 considers that a gift is usually made out of 'detached and disinterested generosity'. Further, it states that: the fact that the giver has a personal motive for making the gift, such as a strong interest or emotional involvement in the work of the DGR, will not disqualify the gift from being tax deductible. Paragraph 140 of TR 2005/13 suggests that a giver may have multiple motivations for making a gift, and this would not change the character of a payment as a gift. However, if a gift is made to achieve 'self-interested commercial or fiscal objectives', paragraph 36 of TR 2005/13 considers that such a transfer would not be made out of detached and disinterested generosity, and thus would not be considered a gift. Your donation of money is to be provided to the university, with a preference that the funds be directed for the use of the institute. However, there is no guarantee that the funds will be used as you prefer. The university will have the discretion to apply the funds in accordance with your preference. The research fellow will be contributing the work of the research group. While you are the unpaid research leader of the research leader of the research group, you have no commercial interest in the work that might be produced by the research group, as any intellectual property rights that flow from the research fellow's contribution will, if not owned by the university, be the property of the research fellow to the extent of their contribution. As a result, we consider that the proposed transfer of your donation of money arises by way of benefaction. | Detailed Reasoning - No material benefit or advantage is received by the giver by way of return: The courts in Federal Commissioner of Taxation v. McPhail (1968) 117 CLR 111 at 116 have explained that only benefits or advantages that are material will affect whether a transfer is considered a gift. It is irrelevant whether the material benefit or advantage comes from the DGR or from a third party. Paragraph 41 of TR 2005/13 states that: Only advantages or benefits that are material will disqualify a transfer of property from being regarded as a gift, this excludes advantages or benefits of a de minimis nature. TR 2005/13 provides a number of factors that may be examined to determine if any benefit or advantage received by the giver by way of return is material. Relevant considerations are listed below: • the elimination or reduction of a legal obligation as a result of the transfer (paragraph 44 of TR 2005/13); • the presence of a link between a benefit or advantage received by the giver and an amount given by the giver (paragraph 158 of TR 2005/13); • the significance of the benefit or advantage received by the giver in comparison with the value of the transfer (paragraph 169 of TR 2005/13); and, • the conferral of any rights, privileges or entitlements on the giver (paragraph 181 of TR 2005/13). Your donation of money will go towards funding a research fellow in the research group, of which you are the research leader. The purpose of establishing the fellowship is to aid in the research work of the research group, as other members of the group work part time and in their spare time. The research fellow will assist in the research work, and will provide a majority of the output. The research fellow will work in collaboration with members of the research group, including yourself, on projects that are identified together by the research group and the advisory board. The research fellow will carry out several or all of critical appraisal, meta-research, preparation of teaching materials, teaching and advocacy. The products of research undertaken by the research group may include: • research papers and publications; • written material, to be distributed to newspapers or blogs for the purpose of education; • teaching material, to be distributed to students or professionals. Reports and results of research work may also be published to the institute website. You will not claim authorship for any work done by solely by the research fellow. Authorship of publications is determined by an international committee's criteria for authorship. The criteria may result in you and the research fellow, as well as any other contributors, being co-authors of a piece of work, based on each individual's contribution. Where the research fellow contributes to work or research by the research group, any intellectual property rights, not otherwise owned by the university, will be the property of the research fellow, not you, to the extent of the research fellow's contribution. In the unlikely event that there is any commercialisation of output from the research fellow, any income that is not retained by the university will go to the research fellow. As the research leader of the research group, some kudos may attach to you where the research fellow has academic achievements. Further, in your role as the research leader of the research group, you are not contractually required to complete specific projects or work. You have the discretion to choose the projects you deem appropriate. These projects are chosen in consultation with the other members of the research group and the advisory board. Your role as the research leader of the research group is not a condition of your paid employment with a third party employer. As you are not contractually required to complete specific projects or work as the research leader of the research group, nor is this role a condition of your paid employment, we consider that a benefit or advantage will not be provided to you as a result of your proposed donation to fund the research fellow in the form of discharging any of your contractual obligations. In addition, we consider that your donation will not result in you receiving authorship, intellectual property rights or income from the research work and output of the research fellow's contribution to the research group products, in the form of any papers, publications or other distributed material. Any authorship, intellectual property rights or income you do receive as a result of working jointly with the research fellow will be based on your own contribution to the research group products. Moreover, we consider that you will not obtain a benefit or advantage as a result of the research fellow contributing to the work of the research group. While you are the unpaid research leader of the research leader of the research group, the benefit of the research fellow's work is obtained by the university, not you personally. The research leader will be working for the university, not you. Any kudos that you might receive in connection with the research fellow's academic achievements may be considered a benefit or advantage arising out of your proposed donation. However, in comparison to the amount your proposed gift, we do not consider the potential benefits or advantages that may arise to be sufficiently significant to be material, and so will not affect the character of your proposed donation as a gift. Therefore, in considering the above characteristics, we have determined that your proposed donation will truly be a gift. | Detailed Reasoning - Conclusion: We consider that your proposed donation to the university is a tax deductible gift or contribution under section 30-15 of the ITAA 1997, as it is an allowable gift type made to an endorsed DGR that has the characteristics of a gift. | Detailed Reasoning - Further issues for you to consider: Section 78A of the Income Tax Assessment Act 1936 ('ITAA 1936') is an anti-avoidance provision that supports the integrity of the gift deduction provisions. It is designed to deny deductions otherwise available under Division 30 of the ITAA 1997 where: • the value of the gift to the recipient is less than the value of the property at the time that the gift is made; • the giver or any associate of the giver obtains any benefit, advantage, right or privilege other than the benefit of a tax saving; or, • the recipient is to acquire any other property from the giver or an associate of the giver. Based on the facts of this case: • There is nothing to suggest that the value of your proposed donation to the university will be less than the value of the your donation at the time you make it; • You will not derive any material benefit or advantage in relation to your donation, as discussed previously; and, • The university is not required to acquire anything from you or your associate. As a result, we consider that section 78A of the ITAA 1936 will not apply to deny your proposed deduction, being the donation you intend to provide to the institute via the university.