Taxation Determination
TD 93/191
Income tax: gifts: can an entity which is seeking recognition in terms of paragraph 78(1)(a), and has been established by a church or community organisation, have a dissolution clause that permits surplus property on winding-up of the entity to go to the general funds of the founding church or community orgaisation?
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FOI status:
may be releasedFOI number: I 1216232| This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20). |
1. No, unless the founding organisation as a whole is recognised under paragraph 78(1)(a) of the Income Tax Assessment Act.
2. Paragraph 78(1)(a) enables donors to claim income tax deductions for gifts of $2 and upwards to various classes of funds, authorities and institutions. The paragraph specifically names a small number of organisations and also lists various classes of entities which attract the concession.
3. Taxation Ruling IT 2259 discusses an appropriate dissolution clause for entities. The ruling provides that on dissolution surplus property must be transferred to some other entity which comes within the scope of paragraph 78(1)(a). The form of wording of the dissolution clause is at the discretion of the founders of the entity, however, IT 2259 gives an example of a commonly used dissolution clause.
4. The requirements of the dissolution clause as described in IT 2259 are to ensure that, in the event of an approved entity being wound-up, gifts which have attracted income tax deductibility for the donor flow to, and are ultimately used by, an entity which itself attracts the concession.
Example:
A church establishes a public fund for the relief of persons in necessitous circumstances in terms of sub-paragraph 78(1)(a)(iii). As gifts to the general funds of a church are not deductible to donors it is not acceptable to provide that on the dissolution of the fund surplus cash and property are transferred to the general funds of the church. Surplus cash and property may only be transferred to some other 'tax deductible' entity. That entity may be, for example, another tax deductible fund conducted by the church, a tax deductible organisation associated with the church or some other unassociated entity, as long as it is recognised in terms of paragraph 78(1)(a).
Commissioner of Taxation
7 October 1993
Previously issued as Draft TD 92/D202
References
ATO references:
NO CHM COR PT2176
Related Rulings/Determinations:
IT 2259
Subject References:
dissolution clause
gifts
winding-up
Legislative References:
ITAA 78(1)(a)(ii)
| Date: | Version: | Change: | |
| You are here | 7 October 1993 | Original ruling | |
| 9 August 1995 | Withdrawn |