Private ruling: Income Tax: donations to fundraising event
Date of advice: 22 December 2016
Published: June 2017
Ruling period: 1 July 2016 to 30 June 2017
Date scheme commenced: During the income year ended 30 June 2017

Ruling: Q1: Will monetary donations made to a deductible gift recipient's annual fundraising event be tax deductible for the donor pursuant to Division 30 of Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: The applicant is a health promotion charity which is endorsed as a deductible gift recipient (DGR). It raises funds for its chosen charities by holding an annual fundraising event which is supported by businesses and individuals by way of monetary gifts which fund the annual fundraising event. The annual fundraising event is a community fundraising event that is free of charge to the public to attend and participate. There are no conditions imposed regarding the donations made to the DGR for the fundraising event. Some of its supporters do not seek acknowledgement and others are publically acknowledged by the DGR merely as a way of thanking them. Contributions from donors to the DGR for the fundraising event are generally received prior to the event but may also be received during the event. The DGR publically acknowledges its supporters for contributions made to support the fundraising event and this is done via its social media applications including the website.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 30 | Income Tax Assessment Act 1997 Subdivision 30-B | Income Tax Assessment Act 1997 Subdivision 30-BA | Income Tax Assessment Act 1997 Section 30-15 | Income Tax Assessment Act 1997 Subsection 30-15(1) | Income Tax Assessment Act 1997 Section 30-17

Reasons for decision: Summary: Monetary donations of $2 or more made by a donor to the DGR's annual fundraising event will be tax deductible as gifts | Detailed Reasoning - Detailed reasoning: Division 30 of the ITAA 1997 deals with the deductibility of gifts or contributions. Section 30-15 provides a table to explain the special conditions which must be satisfied before a gift is allowable as a tax deduction to the donor. This summarised in subsection 30-15(1) as: ● who the recipient of the gift or contribution can be; and ● the type of gift or contribution that you can make; and ● how much you can deduct for the gift or contribution; and ● any special conditions that apply. In relation to the gift recipient, section 30-15 provides that: ● The recipient must be a fund, authority or institution covered by an item in any of the tables in subdivision 30-B of the ITAA 1997, and ● The recipient must meet the requirements of section 30-17 of the ITAA 1997. Section 30-17 of the ITAA 1997 provides that the fund, authority or institution must be an entity that is endorsed under Subdivision 30-BA of the ITAA 1997. This Subdivision sets out the rules about endorsement of entities as deductible gift recipients. In this case, the applicant is endorsed as a DGR and is therefore covered by Item 1 of the table in section 30-15 of the ITAA 1997. Item 1 of the table in section 30-15 provides that a gift of money must be $2 or more to satisfy Division 30 as being tax deductible. As donations made by donors to the DGR's annual fundraising event are monetary in character, they will be deductible in this case, provided the donation is $2 or more. Taxation Ruling TR 2005/13 Income tax: tax deductible gifts - what is a gift explains the meaning of a gift for the purposes Division 30 of the ITAA 1997. Paragraph 12 of TR 2005/13 states that 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. 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. In the circumstances of donations made to the DGR for the annual fundraising event: ● there will be a transfer of beneficial interest in property as the money donated to the DGR becomes its property to enable it to put the fundraising event together; ● the donations to the DGR will be made voluntarily as it is up to the donors to decide whether they want to donate; and ● the donations made to the DGR are by way of benefaction because they will enable it to put on the fundraising event. Paragraphs 37 to 44 of TR 2005/13 deals further with the issue of 'no material benefit or advantage' and paragraph 41 states that only advantages or benefits that are material will disqualify a transfer of property from being regarded as a gift. The following examples cited in paragraph 43 of TR 2005/13 are not a material benefit or advantage: ● one that has no link with the transfer; ● one that is insignificant in relation to the value of the transfer; ● one that only constitutes advertising for the DGR; ● one that cannot be put to use and is not marketable; ● one that does not create any rights, or confer any privileges or entitlements; ● one that merely accounts for the use of the funds; ● one that is mere public recognition of the giver's generosity; or ● one that confers membership of a DGR which was neither sought nor known by the giver at the time of making the transfer. In this case, the DGR makes public recognition of donors to the annual fundraising event on its website and social media. Paragraph 186 of TR 2005/13 states that the public recognition accorded to givers will commonly not be a material benefit. This includes mere acknowledgement in newsletters, annual reports, on a donors' board, and so on. As Bowen CJ said in Leary v FC of T , 'a man may, by his gifts, gain fame or formal honours without losing his tax deductions'. Therefore, acknowledging donors on modern social media outlets such as a website will not result in a material benefit or advantage to the donor in accordance with paragraph 186 of TR 2005/13. Hence, there will be no material benefit or advantage received by the donors in this case. Whether a contribution is made in return for a right to attend the fundraising event is considered in Item 7 of the table in section 30-15 of the ITAA 1997. This item relates to deductible gifts or contributions to a fund, authority or institution covered by item 1 or 2 of this table and describes how much you can deduct for contributions made to a DGR. Item 7 provides that if the contribution is money, then the amount you can deduct will be amount of the contribution, reduced by the GST inclusive market value, on the day you made the contribution, of the right to attend, or participate in, the fundraising event. However, item 7, at paragraph (d) requires that the contribution is not a gift and (e), the contribution is made in return for a right permitting you to attend, or participate in, a fundraising event. In this case, it is considered that the donation is a gift, and, the GST inclusive market value to attend or participate in the fundraising event is nil as it is free of charge to the public to attend and participate. Therefore contributions to the DGR for the fundraising event are not made in return for the right to attend, or participate in, the fund-raising event as it is free to the public. Accordingly, donations of $2 or more made by donors to assist with the DGR's annual fundraising event will be tax deductible as gifts.