Gifts and Fundraising March 27, 2018
Overview • Receiving tax-deductible gifts: What is a gift? • Donors claiming tax deductions • Fundraising events • Valuing contributions and minor benefits • Gifts and fundraising for non-DGRs Unclassified – Gifts and Fundraising 2
What is a Gift?
What is a Gift? • A gift is a donation of money or property made voluntarily with no material benefit to the donor. • To be tax-deductible, the gift must have the following characteristics & features: There is a transfer of money or property The transfer is made voluntarily The DGR is advantaged materially by the transfer The donor does not materially benefit from the gift. • This is explored in detail in Taxation Ruling 2005/13 Unclassified – Gifts and Fundraising 4
What is a Gift? There is a transfer of money or property: • DGR must receive full title, custody and control • Donor must have held the donated property prior to transfer If the donor owns a building and allows a DGR to lease it with no rent, this is not a tax deductible gift as the donor didn’t hold the leasehold interest • DGR cannot act as a conduit or trustee for a non-DGR • Transfer must be of money or property Services provided to a DGR or expenses paid by a volunteer are not tax deductible gifts (no transfer of money or property) Unclassified – Gifts and Fundraising 5
What is a Gift? The transfer is made voluntarily • Transfer is not a gift if it is made to fulfil a legal obligation Payments to a school building fund as an alternative to school fees are not a gift • Transfer is not a gift if it entitles donors to services But will be a gift if donors are entitled to receive the services whether or not they make the gift (e.g. collection tin in free counselling suite) • Transfer can take the form of a contract and still be a gift A donor can enter an agreement to make monthly donations Unclassified – Gifts and Fundraising 6
What is a Gift? The DGR is advantaged materially by the transfer • The DGR must obtain the full benefit of the transferred property DGR cannot act as a conduit or trustee for a non-DGR • The DGR must have absolute discretion on how the money or property will be used Donor can nominate a preference for how the money or property will be used but DGR must have absolute discretion Unclassified – Gifts and Fundraising 7
What is a Gift? The donor does not materially benefit from the gift • Donor cannot receive a benefit in return, even if the benefit is less than the value of the property they transferred Cannot notionally split the price of a ticket between the value of a meal received and a portion that represents a gift – no part of the transfer would be a gift (might be a deductible contribution) • The only exception to the above is if there is considerable disproportion between value of transfer and benefit received Such as a $4 key ring compared to a $4,000 donation, receiving updates on a sponsor child or mere acknowledgement of a donor in a newsletter Question of fact Unclassified – Gifts and Fundraising 8
What is a Gift? The donor does not materially benefit from the gift • Transfer may still be a gift if the benefit is: Received regardless of whether a transfer is made - Collections at the door of an event if no one is refused entry should they choose not to give Not anticipated by the giver • Transfers made during DGR fundraising campaigns that offer incentives are unlikely to be gifts • Sponsorships that earn the giver a benefit of commercial advertising are unlikely to be gifts (might be a business deduction) Unclassified – Gifts and Fundraising 9
What is not a Gift? • Providing services to a DGR • Costs incurred by a volunteer when providing services to a DGR • Items bought at a charity auction • Raffle tickets • Gift vouchers donated to a DGR • Purchasing pens, pins, teddy bears etc • Payments to a school building fund as an alternative to a portion of school fees • Amounts given to a DGR to be merely passed on to a non-DGR • Allowing a DGR to use your property rent-free Unclassified – Gifts and Fundraising 10
Donors claiming tax deductions
Is it Deductible? As a donor you can claim a tax deduction for most gifts and contributions in the income year you made the gift or contribution. Is the recipient a DGR? No Yes Does it meet the No No Is it a Deductible definition of a Contribution? gift? Yes Yes Does it fall into one of the Gift Types? No Yes Deductible to Not deductible to donor donor Unclassified – Gifts and Fundraising 12
Gift Types
Gift Types • To be deductible, the gift must fall into a Gift Type: • Gifts of $2 or more • Property purchased during the 12 months before making the gift • Property we value at more than $5,000 • Shares valued at $5,000 or less • Trading stock • Cultural Gifts Program • Heritage gifts Unclassified – Gifts and Fundraising 14
Property purchased during the 12 months before making the gift • Amount of tax deduction is the lesser of: Market value on day of donation; and Amount donor paid for the property • Donor is responsible for determining the value of the gift (not the DGR) • GST implications for donor if the donor is registered for GST Unclassified – Gifts and Fundraising 15
Property we value at more than $5,000 • Property must have been either: purchased more than 12 months before it was donated or not purchased by the donor (e.g. won or inherited) • Requires a Commissioner valuation (for deduction value) Must complete an application form and provide a certificate from the DGR (describing the gift and confirming it has been received) Must pay a non-refundable (but tax deductible) application fee upfront and a valuation fee (less application fee) Unclassified – Gifts and Fundraising 16
Shares valued at $5,000 or less • The shares must be: Acquired by the donor at least 12 months before being donated In a listed public company Quoted on ASX at time of donation as less than $5,000 • Shares can be purchased, inherited, won etc • Amount of the tax deduction is the market value as listed on the ASX on the day the shares were donated Unclassified – Gifts and Fundraising 17
Trading Stock • Amount of tax deduction is the market value on the day the trading stock was donated • Adjustments are required if the donor is registered for GST • Market value may also need to be included in the donor’s assessable income Unclassified – Gifts and Fundraising 18
Cultural Gifts Program • To encourage people to donate cultural items to the following: the Australiana Fund the Australian Government for Artbank public library in Australia public museum in Australia public art gallery in Australia institution in Australia consisting of a public library, a public museum and a public art gallery or of any two of them • Generally the donor can claim the average of two or more written valuations made by valuers approved by the Arts Secretary • More detailed information is available on our website Unclassified – Gifts and Fundraising 19
Fundraising events and deductible contributions
Running Fundraising Events • If you run a fundraising event your donors may make contributions, like the cost of a ticket to attend your event. • Because they get a benefit they have not made a gift; however, they may be able to claim a portion of their contribution as a tax deduction. • For your donors to be able to claim tax deductibility there are various conditions that must be met. The things you must do are: Ensure your organisation is a DGR. Advise your donors if any part of their contribution is tax deductible, and if so, how much (that is, let them know what the minor benefit is). Provide your donors with receipts. Comply with state, territory and local government fundraising requirements. Run fewer than a total of 15 events of the same type in one financial year. Unclassified – Gifts and Fundraising 21
Deductible Contributions • A contribution occurs when a donor receives something with a monetary value in return for their donation • To be deductible, a contribution to a DGR must be: in respect of an eligible fundraising event ; and an eligible contribution • The deduction will be the value that would have been allowed under the Gift Type rules, less the GST inclusive market value of what the donor received • This is only available to individual taxpayers Unclassified – Gifts and Fundraising 22
Eligible Fundraising Event • For a contributor to claim a tax-deductible contribution, the donation must be for an eligible fundraising event, which is a DGR fundraising event conducted in Australia, including: fetes, balls, gala shows, dinners, performances and similar events events involving sales of goods if selling these goods is not a normal part of the supplier's business Unclassified – Gifts and Fundraising 23
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