Sales Tax Determination

STD 96/8

Title: Catalogues or advertising matter for distribution to always-exempt persons

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FOI status:

may be releasedFOI number: I 1218231

Background

In a recent Administrative Appeals Tribunal (AAT) case, Case 16/96 96 ATC 225; Case 10,728 (1996) 31 ATR 1387, the Tribunal allowed sales tax exemption on some trade catalogues which were said to have been donated to always-exempt bodies.

As a result of this decision, the Australian Taxation Office (ATO) has received a number sales tax refund applications relating to trade catalogues or advertising matter that have been distributed free of charge to always-exempt bodies.

This determination sets out the ATO view on the eligibility of these refund claims.

Issue

Is the distribution of trade catalogues or advertising matter free of charge a donation ?

Decision

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The distribution of trade catalogues or advertising matter free of charge is not a donation .

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Therefore, sub-item 193(1)(a) in Schedule 1 of the Sales Tax (Exemptions & Classifications) Act 1992 (E & C Act) does not apply to exempt from sales tax, trade catalogues or advertising matter distributed free of charge to always-exempt bodies.

Date of effect

This determination is effective immediately.

Reasons

In the recent case, the AAT considered whether imported trade catalogues were exempt from sales tax under items 105, 106 and sub-item 193(1)(a) of Schedule 1 of the E & C Act .

The trade catalogues were manufactured by, and imported from, the applicant's parent company in England and were almost entirely devoted to products manufactured by the applicant's parent company. The catalogues set out a description of each item, a photograph, technical details, code and price and facilities for the ordering of the products by Australian customers, including by always-exempt persons.

The AAT confirmed that the trade catalogues imported by the applicant were not always-exempt printed matter under either Items 105 or 106 in Schedule 1 of the E & C Act .

However, the AAT did decide that some of the catalogues fell for exemption under sub-item 193(1)(a) in Schedule 1 of the E & C Act being goods for use by the applicant for donation to an always-exempt person.

The AAT considered, in this particular case, that the essential matter to be determined in relation to sub-item 193(1)(a) was whether the goods were assessable goods when donated. No submissions were heard on the question of whether the distribution of trade catalogues free of charge was a donation and, consequently, the AAT did not specifically consider this issue.

The word donation , as it appears in sub-item 193(1)(a) , should be given its ordinary meaning. The Macquarie Dictionary defines 'donation ' as '1. the act of presenting something as a gift. 2. a gift, as to a fund; a contribution .' The Shorter Oxford Dictionary defines it as '1. The action or faculty of giving; presentation; grant. 2. Law. The action or contract by which a person transfers the ownership of a thing from himself to another, as a free gift. 3. That which is presented; a gift .'

The meaning of 'gift' has been examined by the Courts in the context of whether a gift was made in the terms of section 78 of the Income Tax Assessment Act 1936 (ITAA) . The Courts have decided that there are several tests that need to be satisfied for transfer of property to constitute a gift in terms of that section.

These tests include:

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the property must be transferred voluntarily;

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there must be no advantage of a material character received by the donor; and

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there must be an element of benefaction to the transfer.

It is considered that the tests applied by the Courts in dealing with the meaning of 'gift ' in section 78 of the ITAA should also be applied in considering the meaning of the word 'donation ' in sub-item 193(1)(a) .

Trade catalogues or advertising matter are commonly distributed free of charge in the normal course of business to promote the sale of products. They are not distributed for the benefaction of the recipient. There is a commercial or fiscal objective behind the distribution of the material with an expectation that the distributor of the catalogues or advertising matter, or some other associated entity, will derive a material benefit. The distribution of trade catalogues and advertising matter free of charge is not a donation for the purposes of sub-item 193(1)(a) in Schedule 1 of the E & C Act .

Communication of the Decision

This determination has been made available for publication by the sales tax publishing houses.

Commissioner of Taxation
21 August 1996

References

ATO references:
NO NAT 96/8172-8

Related Rulings/Determinations:

IT 2071;
IT 2443

Subject References:
advertising matter;
catalogues;
donations to always-exempt persons;
gifts

Legislative References:
Sales Tax Assessment Act 1992 Table 1 Schedule 1;
Sales Tax (Exemptions & Classifications) Act 1992 Items 105,
106,
193;
ITAA 78

Case References:
AAT Case 16/96
96 ATC 225

Case 10,728
(1996) 31 ATR 1387
FC of T v. McPhail
(1968) 117 CLR 111
(1968) 15 ATD 16
Leary v. FC of T
80 ATC 4438
(1980) 11 ATR 145