Draft Taxation Determination

TD 93/D61

Income tax: is a payment of money to an eligible 'umbrella' organisation under a 'preferred donation arrangement' a tax deductible gift if the donor taxpayer or an associate obtains a collateral benefit?

• Please note that the PDF version is the authorised version of this draft ruling.
  This document has been finalised by TD 93/139.

FOI status:

draft only - for comment

Preamble

1. No. The amount paid is not a tax deductible gift for the purposes of section 78 of the Income Tax Assessment Act 1936.

2. A 'preferred donation arrangement' involves a person paying money to an 'umbrella organisation' which is an eligible gift recipient. There is an understanding that the money will be passed on to an affiliate organisation preferred by the donor to fund projects or events nominated by the affiliate and approved by the umbrella organisation.

3. Under section 78 a payment of money to an organisation listed or described in paragraph 78(1)(a) is tax deductible where the donation constitutes a 'gift'. A gift involves a donor transferring property voluntarily to a donee without the donor or an associate of the donor receiving or being entitled to receive in return any material advantage or compensation (apart from the tax saving). The recipient organisation must:

(a)

obtain in its own right the full value or benefit of the property; and

(b)

be empowered and have the absolute discretion to distribute the property to those organisations or activities nominated by the donor.

Example:

An eligible "'umbrella' organisation operates a 'preferred donation scheme' for affiliated organisations.

Participants in an approved event nominated by an affiliate are required to fund some of the cost of participation either by paying directly for their travel expenses or by making 'preferred donations' to the 'umbrella' organisation. A participant pays an appropriate amount to the 'umbrella' organisation. The 'umbrella' organisation passes the funds to its affiliate organisation and the participant is not required to pay travel expenses.

In this instance the payment to the 'umbrella' organisation would not be a tax-deductible gift because the donor will receive a collateral material benefit - that is, the removal of the obligation to pay travel expenses.

Commissioner of Taxation
4 March 1993

References

BO can ac 752 Pt10

Related Rulings/Determinations:

IT 2071
IT 2443

Subject References:
gifts
umbrella organisations
preferred donations

Legislative References:
ITAA 78(1)(a)
ITAA 78(1)(a)(lxxxiv)
ITAA 78A