Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello MP)Chapter 6 - Deductions for contributions relating to fund - raising events
Outline of chapter
6.1 Schedule 6 to this Bill extends eligibility for tax deductions for contributions to deductible gift recipients (DGRs), where an associated minor benefit is received for an eligible fund-raising event. The deduction is available where the value of the contribution is more than $150 (the current threshold is more than $250), and the minor benefit received in return is no more than $150 (currently $100) and 20 per cent (currently 10 per cent) of the value of the contribution, whichever is the less.
Context of amendments
6.2 Prior to 1 July 2004, contributions made to DGRs were not deductible if a benefit was received by the contributor in return for their contribution.
6.3 From 1 July 2004, to increase flexibility for fund-raising, the 'minor benefits measure' allows deductions for contributions of certain cash and property to DGRs for eligible fund-raising events, where a minor benefit is received in return, so long as the value of the contribution is more than $250, and the minor benefit received in return is no more than $100 and 10 per cent of the value of the contribution, whichever is the less. Eligible fund-raising events are one-off fund-raising events conducted in Australia. The deduction is limited to that part of the contribution that is in excess of the minor benefit.
6.4 A review of the suitability of the thresholds of the minor benefits measure was undertaken in consultation with the Prime Minister's Community Business Partnership, to examine whether the thresholds should be extended to provide broader accessibility of the tax concession for fund-raising across the community.
Summary of new law
6.5 The amendments to the minor benefits measure allow individuals to deduct contributions to DGRs if:
- •
- the value of the contribution is more than $150; and
- •
- the minor benefit received in return is no more than $150 and no more than 20 per cent of the value of the contribution, whichever is the less.
6. 6 These amendments apply to contributions made on or after 1 January 2007.
Comparison of key features of new law and current law
| New law | Current law |
|---|---|
| A deduction is allowed for contributions to DGRs for a fund-raising event, where the value of the contribution is more than $150, and the minor benefit received in return does not exceed the lesser of: 20 per cent of the value of the contribution, and $150. | A deduction is allowed for contributions to DGRs for a fund-raising event, where the value of the contribution is more than $250, and the minor benefit received in return does not exceed the lesser of: 10 per cent of the value of the contribution, and $100. |
Detailed explanation of new law
6.7 From 1 July 2004, individuals can deduct contributions of certain cash and property to DGRs, where a minor benefit is received in return, so long as the value of the contribution is more than $250, and the minor benefit received in return is no more than $100 and 10 per cent of the value of the contribution, whichever is the less.
6.8 The amendments extend the current thresholds to provide DGRs with greater flexibility for their fund-raising activities and allow an individual to receive a deduction for contributions to DGRs of cash or property, where:
- •
- the value of the contribution is more than $150; and
- •
- the minor benefit received by the contributor in return, is no more than $150 and no more than 20 per cent of the value of the contribution, whichever is the less.
[Schedule 6, items 1 to 9, subsection 30 - 15(2), items 7 and 8 in the table]
Example 6.1: Fund-raising event
Anthony pays $260 to attend a charity golf day, hosted by a DGR. The market value of an 18-hole golf game is $50. As the market value of the golf game is less than $150 and less than 20 per cent of the value of his contribution ($260), Anthony can deduct $210 ($260 less $50).
Without the amendments to the thresholds, Anthony would not be entitled to a deduction as the market value of the minor benefit, the golf game ($50), is more than 10 per cent of the value of his contribution ($260 × 10 per cent = $26).
Example 6.2: Fund-raising auction
Kate successfully bids $2,000 for a T-shirt at a DGR fund-raising event auction. The T-shirt has a market value of $120. As the market value of the T-shirt is less than $150 and less than 20 per cent of the value of her contribution ($2,000), Kate can deduct $1,880 ($2,000 less $120).
Without the amendments to the thresholds, Kate would not be entitled to a deduction as the market value of the minor benefit, the T-shirt ($120), is more than $100.
6.9 All other requirements within the existing law relating to deductions for contributions for fund-raising events, are unchanged.
Application and transitional provisions
6.10 These amendments apply to contributions made on or after 1 January 2007. [Schedule 6, item 10]