DONATIONS - WHEN IS A BENEFIT 'MATERIAL'
21 July 2005
The question of whether a payment (cash or otherwise) provides a material benefit to the donor is important for GST and income tax purposes.
A donation can never be consideration for GST purposes if it is made to a non-profit body.
Donations/gifts over $2 in value can be deductible for income tax purposes.
For a payment to be a gift or donation, the following characteristics will be found:
·
there is a transfer of the beneficial interest in property;
·
the transfer is made voluntarily;
·
the transfer arises by way of benefaction; and
·
no material benefit or advantage is received by the giver by way of return.
It is a pernnial problem to determine whether a gift provides a material benefit to the donor. In a new ruling, the Commissioner provides some assistance in setting out the following features of 'materiality':
Each of these is not a material benefit or advantage:
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one that has no link with the transfer;
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one that is insignificant in relation to the value of the transfer;
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one that only constitutes advertising for the DGR;
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one that cannot be put to use and is not marketable;
•
one that does not create any rights, or confer any privileges or entitlements;
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one that merely accounts for the use of the funds;
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one that is mere public recognition of the giver's generosity; or
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one that confers membership of a DGR which was neither sought nor known by the giver at the time of making the transfer.
Some circumstances which may lead to a conclusion that a benefit or advantage is material are where:
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the benefit is sought by the giver in connection with the transfer;
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as a result of the transfer, a legal obligation is eliminated or reduced;
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the benefit is offered by the DGR as an inducement to potential givers;
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there is public recognition for purposes of commercial advertising for the giver;
•
membership rights and privileges are obtained as a result of transfer; or
•
there is a requirement to report to the giver on results of research undertaken by the DGR and the results are to be used by the giver.