Gifts and donations of $2 or more in money or certain types of property are allowable income tax deductions. A donation must not have conditions attached to it, nor can the donor derive a material benefit from the transaction.

Monetary gifts or donations of $2 or more in money (e.g. cash, cheque, credit card) are eligible for a deduction in the income year in which the donation is made. The amount of the deduction which can be claimed is limited to the amount of your taxable income, and any amount in excess of the taxable income does not contribute to a loss forward. However, since 1 July 2003 deductions for gifts in money to certain beneficiaries (including the Queensland Art Gallery Foundation) can be spread over five years. A taxpayer who wishes to take advantage of this concession must make a written election specifying the period (i.e. the year of donation and the four subsequent income years) over which the deduction is to be spread. The election must be lodged with the Arts Secretary of the Department of Communications, Information Technology and the Arts before you lodge your income tax return.

Different criteria apply depending on whether the property is:

• property other than real estate or property which qualifies as a Cultural Gift
• real estate
• cultural gifts.

A brief description on these categories follows:

Property other than real estate or cultural gifts

A donation of such property (e.g. shares, units in public trusts) is an allowable tax deduction provided that the property is either valued at over $5,000 or is donated within 12 months of your acquiring the property.

In the case of property acquired less than 12 months before donation, the tax deduction is the lower of the cost of the property or its market value. Where the property is valued at more than $5000 and has been held for more than 12 months, the deduction will be the value determined by valuers from the Australian Taxation Office.

As with cash donations, the amount of the deduction which can be claimed is limited to your taxable income, and any amount in excess of the taxable income does not contribute to a tax loss.

However, since 1 July 2003 gifts of property valued at more than $5000 to certain beneficiaries (including the Queensland Art Gallery Foundation) can be spread over five years. An election, with similar requirements to those outlined above for cash donations, must be lodged with the Department of Communications, Information Technology and the Arts by any taxpayer wishing to take advantage of this concession.

In the case of property other than real estate, it is worth noting that the donation of property to an art gallery foundation will not give rise to a Capital Gains Tax liability.

Gifts of real estate or interests in real estate

Similar rules apply to donations of real property in that, for real estate owned for less than 12 months, the tax deductible amount is the lower of the market value or cost of the land, whereas for land held more than 12 months, the deduction will be the value of the real estate as determined by the Australian Taxation Office.

However, the transfer of the real estate is a disposal for Capital Gains Tax purposes and the disposal consideration is deemed to be the market value of the real estate. If the market value exceeds the acquisition price of the land, there may be a liability to Capital Gains Tax. Nevertheless, as a general rule, the amount of the allowable deduction will exceed the capital gain (if any).

Cultural gifts

Gifts of property (other than real estate or interests in real estate, a building or part of a building) are deductible if they are significant cultural items donated to the Gallery.

The income tax deduction is equivalent to the market value of the art work. The market valuation calculation requires at least two written valuations of the donated property by valuers who are approved by the Secretary of the Department of Communications, Information Technology and the Arts. The deductible amount is the average of the written valuations. Any valuation fees met by the donor will also be tax deductible.

The Foundation can assist a donor to choose approved valuers.

Deductions for gifts of cultural property may be spread over five years. The conditions necessary to take advantage of this concession are similar to the conditions applying to a cash donation where the deductions are spread over five years.

Gifts of property under the Cultural Gifts Program are exempt from Capital Gains Tax.

This information was provided by Gadens Lawyers, Brisbane.