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Note: This document forms part of our publication GiftPack.
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To be tax deductible, a gift must be money or property covered by one of the gift types described in this chapter.
This chapter explains, for each gift type:
- what the gift type covers
- who can receive it, and
- valuation issues.
To be tax deductible, a gift must be covered by one or more of the following gift types.
Gift type
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Explanation of gift type
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$2 or more – money
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See $2 or more
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Property > $5,000 – property valued by the Tax Office at more than $5,000
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See Property > $5,000
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Property < 12 months – property purchased during the 12 months before the gift was made
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See Property < 12 months
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Shares ≤ $5,000 – listed shares valued at $5,000 or less, and acquired at least 12 months before the gift was made
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See Shares ≤ $5,000
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Trading stock – trading stock disposed of outside the ordinary course of business
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See Trading stock
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Cultural gifts – gifts made under the Cultural Gifts Program
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See Cultural gifts
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Cultural bequests – gifts made under the Cultural Bequests Program
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See Cultural bequests
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Heritage gifts – places included in the National Heritage List, the Commonwealth Heritage List or the Register of the National Estate
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See Heritage gifts
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For each gift type, this section explains the types of gifts covered, the types of DGRs that can receive the gifts, and valuation issues.
Issues relating to making elections to spread the deduction for each gift type are also covered.
The DGR table gives the gift types for each general DGR category. Gifts that fall within the first five gift types can be made to almost all DGRs. Gifts in the other gift types can be made only to limited groups of DGRs.
In some situations, a gift may fall within more than one of the gift types. Donors may use the gift type that is most appropriate.
Example
Samantha owns an antique book shop. She is considering giving an expensive antique book from the shop’s trading stock to a public museum that is a DGR.
If the requirements of the particular gift type are met, such a gift may fall within the following gift types, ‘property > $5,000’, ‘trading stock’, or ‘cultural gifts’.
She may claim a deduction under the gift type that is most appropriate.
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What a gift is and other requirements for a gift to be tax deductible are explained in Donors and gifts.
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$2 or more
Type of gift
This gift type covers gifts of money, including foreign currency. The money may be paid in various ways, including by cash, cheque, credit card or electronically.
The gift to a DGR must be $2 or more. A series of gifts made to a DGR in an income year may be aggregated to work out if the gift is $2 or more.
Example
For the last 20 weeks of the income year, Elizabeth participated in a workplace giving program. She has been having $1.50 deducted from her weekly pay. Her employer is sending the money on a weekly basis to a DGR.
Elizabeth can claim $30 as a gift deduction. While each gift to the DGR is $1.50, her total gift to the DGR that year is $2 or more.
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This gift type does not cover testamentary gifts, that is, gifts made under a will.
Recipients
This gift type applies to all types of DGR (except for gifts to the Commonwealth for the purposes of Artbank).
Valuation
The value of the gift for deduction purposes is the amount of money the donor gives to the DGR.
For this gift type, donors can make an election to spread the deduction over a period of up to five years. See Spreading tax deductions for gifts.
Property > $5,000
Type of gift
This gift type covers gifts of property valued by the Tax Office at more than $5,000.
Property has a wide meaning. As well as physical things, it includes rights and interests that are capable of ownership and have a value.
This gift type does not cover testamentary gifts, that is, gifts made under a will.
Recipients
This gift type applies to all types of DGR (except for gifts to the Commonwealth for the purposes of Artbank).
Valuation
If the donor purchased the property during the 12 months before making the gift, the amount of the gift deduction is explained in Property < 12 months.
If the donor did not purchase the property during the 12 months before making the gift, the amount of the gift deduction is the value determined by the Tax Office.
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Property is purchased if it is acquired by way of bargain or sale for money or some other valuable consideration.
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Property that has not been purchased includes prizes won in raffles, property received as a gift, and inherited property.
Tax Office valuations are made by the Australian Valuation Office (AVO), which is a part of the Tax Office. A deposit must accompany the Request for valuation on lodgment with the AVO. The charge for a valuation is advised on processing of your Request for valuation.
Contact: Australian Valuation Office
Philanthropy Program
Australian Valuation Office
PO Box 707
CIVIC SQUARE ACT 2608
Phone: (02) 6216 1978 or (02) 9685 8535
National Coordinator – Chris Fratzia
Fax: (02) 6216 1996
Website: www.avo.gov.au
It is up to the donor, not the DGR, to find out the value of the gift.
For this gift type, donors can make an election to spread the deduction over a period of up to five years. See Spreading tax deductions for gifts.
Property < 12 months
Type of gift
This gift type covers gifts of property purchased by the donor during the 12 months before making the gift.
Property has a wide meaning. As well as physical things, it includes rights and interests that are capable of ownership and have a value.
For gifts of trading stock where the disposal takes place outside the ordinary course of business, see Trading stock.
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Property is purchased if it is acquired by way of bargain or sale for money or some other valuable consideration.
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Property that has not been purchased includes prizes won in raffles, property received as a gift, and inherited property.
Example
Giulia wins a desk in a raffle. If she gives it to a DGR, it will not fall within this gift type. She would have to check if it was covered by another gift type that applied to the DGR.
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The value of the gift must be $2 or more.
This gift type does not cover testamentary gifts, that is, gifts made under a will.
Recipients
This gift type applies to all types of DGR (except for gifts to the Commonwealth for the purposes of Artbank).
Valuation
The amount of the gift deduction is the lesser of:
- the market value of the property on the day the gift is made, and
- the amount paid by the donor for the property.
Example
Clarence purchases an item of property for $600 and donates it to a DGR 10 months later. The market value at the time Clarence makes the gift is $500.
Clarence cannot claim $600 because the market value is less than the amount paid. He can claim only $500 (provided the claim does not add to or create a tax loss).
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It is up to the donor, not the DGR, to find out the market value of the gift.
Market value
For donors who are registered for GST or required to be registered, the amount that would otherwise be the market value is reduced by an amount equal to the GST credit (if any) to which the donor would have been entitled if:
- the donor had acquired the property at the time the gift was made, and
- the acquisition had been solely for a creditable purpose.
Donors who are not registered for GST, and are not required to be registered, do not need to adjust the market value.
Example
Franziska runs a restaurant and is registered for GST. She gives some of the restaurant’s kitchenware to a DGR on 7 November 2006. The market value on that day (including GST) was $2,200.
If she had acquired the kitchenware for $2,200 on that day, she would have been entitled to a GST credit of 1/11th, given the assumption it would be used solely for the restaurant. That means she would have been able to claim back $200 of GST on the purchase.
As a result, Franziska’s market value for gift deduction purposes would be $2,000, that is, $2,200 minus $200.
If Franziska was not registered for GST and was not required to be registered, the market value would be $2,200.
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Amount paid
For donors who are registered for GST, or are required to be registered, the amount paid is reduced by the amount of the GST credit (if any). This is because the donor effectively receives a refund of the GST paid on purchasing the gifted property.
If GST was not included in the price of the property purchased by the donor, no adjustment would be made. Examples are purchases from businesses that are not registered for GST and not required to be registered.
For donors who are not registered for GST, and not required to be registered, the amount paid is not adjusted to exclude GST.
Example
Sergei is a builder who is registered for GST. He gives timber he had bought for his business to a DGR. It cost him $3,300.
Because Sergei would be entitled to a GST credit of $300 (that is 1/11th of $3,300), his amount paid for gift purposes would be $3,000.
If Sergei was not registered for GST and was not required to be registered, the amount paid would be $3,300.
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Spreading tax deductions
For this gift type, donors can make an election to spread the deduction over a period of up to five years where the gift has been valued by the Tax Office at more than $5,000. Tax Office valuations are made by the Australian Valuation Office, which is part of the Tax Office. See contact details.
The amount that can be spread is the amount of the gift deduction that can be claimed under this gift type.
Example
Bill purchases property in May 2007 for $4,000 and donates it to a DGR nine months later. The market value at the time he makes the gift is $6,000.
Bill’s tax deduction for 2006–07 (provided the claim does not add to or create a tax loss) is $4,000.
Bill asks the Tax Office to value the property at the time the gift was made. The Tax Office values it at more than $5,000.
He can then elect to spread his $4,000 deduction over 2006–07 and the four following years.
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How to make an election to spread a tax deduction is explained in Spreading tax deductions for gifts.
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In some situations a gift may fall under more than one. Donors may use the gift type that is most appropriate. See gift types.
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Shares ≤ $5,000
Type of gift
This gift type covers the gift of shares, but only if four conditions are met:
- the shares were acquired in a listed public company
- when the shares were gifted, they were listed for quotation on the official list of an Australian stock exchange
- the shares were acquired at least 12 months before they were gifted, and
- the market value of the shares was $5,000 or less on the day they were gifted.
A share in a company refers to a share in the capital of the company. Securities that are not shares, including derivatives of shares, are not included. Also, shares that are suspended from trading (other than a mere trading halt) are not listed shares.
The shares can be acquired by the donor through a variety of means, including shares that have been purchased, inherited, won, received as a gift or received as a bonus.
This gift type does not cover testamentary gifts, that is, gifts made under a will.
Recipients
This gift type applies to all types of DGR (except for gifts to the Commonwealth for the purposes of Artbank).
Valuation
If the donor acquired the shares more than 12 months before making the gift, the value of the gift is the market value of the shares on the day the gift was made, as listed on an Australian stock exchange.
Example
Fiona purchased a parcel of 100 shares in an Australian listed public company on 5 August 2004. On 15 January 2008, Fiona donated the parcel of shares to a DGR. The market value of the shares on 15 January 2008, as listed on the Australian Stock Exchange, was $4.50 per share.
Fiona has donated shares in an Australian listed public company that she purchased more than 12 months before the gift was made. Fiona is entitled to a deduction of $450 being the market value of the shares on the day the gift is made to the DGR.
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If the donor acquired the shares during the 12 months before making the gift, the amount of the gift deduction is the lesser of the market value of the shares on the day the gift was made, and the amount paid for the shares. See Property < 12 months for more information.
A donor can make a gift of shares that includes both shares acquired more than 12 months ago and shares purchased in the last 12 months. The amount that can be deducted for shares acquired more than 12 months ago is the market value of the shares on the day the gift was made, as listed on an Australian stock exchange. For shares purchased in the last 12 months, the amount that can be deducted is the lesser of
- the market value of the shares on the day the gift was made, and
- the amount paid for the shares.
Trading stock
Type of gift
This gift type covers the trading stock of a business, but only if two conditions are met:
- the gift is a disposal of the trading stock outside the ordinary course of the donor’s business, and
- if the gift involves the forced disposal or death of livestock - no income tax election has been made to spread or defer the profit.
For this gift type, it is not necessary for the trading stock to have been purchased during the 12 months before the gift was made.
Example
Ghia operates a furniture retail business. She knows a DGR that could use a particular cupboard she has in stock.
If Ghia gives the cupboard to the DGR, it would fall within the ‘Trading stock’ gift type.
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Recipients
This gift type applies to all types of DGR (except for gifts to the Commonwealth for the purposes of Artbank).
Valuation
The value of the gift is the market value of the trading stock on the day the gift was made.
The donor may also need to include the market value in assessable income under the general rules for income tax.
Example
Joseph operates a retail business and values his trading stock at cost. In the 2005–06 income year he purchased $2,000 of trading stock for resale in his business. The stock was still on hand at the end of that income year. During the 2006–07 income year he gifted the same trading stock to a DGR. At the time of making the gift, the stock had a market value of $3,000.
In the 2005–06 income year Joseph claims as a deduction the $2,000 cost of trading stock purchased in that year. He also records $2,000 as part of his trading stock on hand at the end of the year. There is therefore a neutral effect on taxable income for the 2005–06 year.
In the 2006–07 income year, the stock forms part of his opening trading stock. On the day it is gifted, the stock ceases to be trading stock and does not form part of his closing trading stock for that financial year. Joseph receives a deduction for the difference between his opening and closing stock values, that is $2,000.
As the gift is a disposal of trading stock outside the ordinary course of business, Joseph also includes as assessable income the market value of the trading stock that is $3,000. He will also claim a gift deduction for this amount. The overall effect in the 2006–07 income year is a reduction of $2,000 in his taxable income.
Note: The gift deduction is not allowable to the extent that it adds to or creates a tax loss.
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Market value
For donors who are registered for GST or required to be registered, the amount that would otherwise be the market value is reduced by an amount equal to the GST credit (if any) to which the donor would have been entitled if:
- the donor had acquired the property at the time the gift was made, and
- the acquisition had been solely for a creditable purpose.
Example
Madeleine runs a fabric shop and is registered for GST. She gives some of the shop’s stock to a DGR on 7 November 2006. The market value on that day (including GST) was $2,200.
If she had acquired the stock for $2,200 on that day, she would have been entitled to a GST credit of 1/11th, given the assumption it would be used solely for the purposes of sale. That means she would have been able to claim back $200 of GST on the purchase.
As a result, Madeleine’s market value for gift deduction purposes would be $2,000, that is, $2,200 minus $200.
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Donors who are not registered for GST, and are not required to be registered, do not need to adjust the market value.
Spreading tax deductions
For this gift type, donors can make an election to spread the deduction over a period of up to five years where the Tax Office has valued the gift at more than $5,000. The amount that can be spread is the amount of the gift deduction that can be claimed under this gift type.
Tax Office valuations are made by the Australian Valuation Office which is part of the Tax Office. See contact details.
How to make an election to spread a tax deduction is explained in Spreading tax deductions for gifts.
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In some situations a gift may fall under more than one. Donors may use the gift type that is most appropriate. See gift types.
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Cultural gifts
Type of gift
This gift type covers gifts of culturally significant property (except property that is an estate or interest in land or in a building or part of a building) made under the Cultural Gifts Program.
The Cultural Gifts Program is administered by the Department of the Environment, Water, Heritage and the Arts (DEWHA) with the advice of the Committee on Taxation Incentives for the Arts.
The value of the gift must be $2 or more (except for gifts to the Commonwealth for the purposes of Artbank).
This gift type does not cover testamentary gifts, that is, gifts made under a will.
Recipients
This gift type applies to the following deductible gift recipients (DGRs):
- DGRs that are public libraries, public museums, public art galleries or institutions consisting of two or more of these
- DGRs endorsed as DGRs for the operation of a public library, public museum, public art gallery or an institution consisting of two or more of these
- the Australiana Fund, and
- the Commonwealth for the purposes of Artbank.
The property must be accepted by the DGR for inclusion in a collection it is maintaining or establishing. For Artbank, the property must be accepted by the Commonwealth for inclusion in a collection maintained or being established for the purposes of Artbank.
Intending donors should contact the DGR, then they or the DGR should seek more information from DEWHA.
Valuation
The general rule is that the amount of the deduction is the average of two or more written valuations made by valuers approved by the Secretary to DEWHA.
However, if the property was:
- acquired for the purpose of giving it away
- acquired subject to an arrangement that it would be given away, or
- acquired (otherwise than by inheritance) less than one year before making the gift
the valuation of the gift is the lesser of the amount the donor paid for the property and the average of the written valuations.
Where the written valuations for the property do not fairly represent the GST-inclusive market value of the property, the deduction is adjusted to the GST-inclusive market value on the day the gift was made.
Written valuations are not required if no amount is included in the donor’s assessable income in relation to the gift, and an amount would have been included if the property had been sold rather than gifted. An example could be property purchased with a profit-making intention that is later disposed of by gift. The valuation of the gift is the amount paid for the property, or if the property had been manufactured or created, the amount allowable as a tax deduction if it had been sold by the donor.
If the donor is registered for GST, or required to be registered, these amounts may need to be adjusted.
For this gift type, donors can make an election to spread the deduction over a period of up to five years. See Spreading tax deductions for gifts.
Conditional gifts
A gift deduction is reduced by a reasonable amount if property is donated subject to conditions on the ownership, custody and control of the property.
Capital gains tax exemption
Gifts of property made under the Cultural Gifts Program are exempt from capital gains tax. Any capital gain or loss made from such gifts is disregarded.
This rule does not apply if the donor or an associate of the donor later acquires the gift for less than market value.
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In some situations a gift may fall under more than one. Donors may use the gift type that is most appropriate. See gift types.
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Cultural bequests
The Cultural Bequests Program was administered by the former Department of Communications and the Arts for three years to the end of the 1999–2000 income year. The program is currently suspended.
Holders of certificates issued by the Minister for the Arts while the program was operating can claim a deduction to the value on the certificate.
The gift is deductible in the final tax return of the testator. If the deduction is not claimed in full at that point, because its value exceeds the taxable income, the balance may be claimed by the trustee in the first estate return. However, this cannot add to or create a tax loss in the estate’s tax return.
Heritage gifts
Type of gift
This gift type covers gifts of places included in:
- the National Heritage List, or the Commonwealth Heritage List, under the Environment Protection and Biodiversity Conservation Act 1999, or
- the Register of the National Estate under the Australian Heritage Council Act 2003.
Places included in these lists are:
- places of outstanding natural, Indigenous or historic heritage value to the nation
- places of significant natural, Indigenous or historic heritage value owned or leased by the Commonwealth, and
- places of significant natural, Indigenous or historic heritage value throughout Australia.
This gift type does not cover testamentary gifts, that is, gifts made under a will.
Recipients
This gift type applies to DGRs that are National Trust bodies.
The gift must be accepted by the National Trust body for the purpose of preserving it for the benefit of the public.
Valuation
The general rule is that the valuation of the gift is the average of the written valuations provided by valuers approved by the Department of the Environment, Water, Heritage and the Arts (DEWHA).
For this gift type, donors can make an election to spread the deduction over a period of up to five years. See Spreading tax deductions for gifts.
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In some situations a gift may fall under more than one. Donors may use the gift type that is most appropriate. See gift types.
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Last Modified: Thursday, 13 August 2009
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