Collections law, legal issues for Australian Archives, Galleries, Libraries and Museums. While a significant proportion of cultural funding in Australia comes from government sources, the current climate is one of encouraging private giving for cultural purposes. One way that organisations can obtain private support is through sponsorships and strategic partnerships. An alternative is to seek donations.
The differences between sponsorships and donations are significant: The relationships are also based on completely different tax principles:. For a sponsor, the tax status of the recipient is irrelevant. The only relevant factor is the purpose of the expenditure.
By contrast, for a donor to get a tax deduction the tax status of the recipient is crucial. It must be an endorsed Deductible Gift Recipient DGR. There are no restrictions as to what can be donated. It might be money but it is often collection material. Each species of gift attracts particular administrative requirements intended to promote fairness and transparency in the valuation and tax deduction process.
In this chapter, we look first at the fountainhead of philanthropy — DGR status generally, then describe the Cultural Gifts Program for public collecting institutions and finally briefly look at how organisations that support collecting institutions — but do not themselves come within the definition of a public library, museum or art gallery — can get the benefit of DGR status. If a gift is to be tax deductible, the recipient organisation must be endorsed as a DGR.
The rules that govern eligibility are set out in the income tax legislation and it is not the purpose of this chapter to be a comprehensive guide on DGR status — the legislation lists over thirty categories. Simply understand that there are various ways that you can seek endorsement depending on the nature and objects of the organisation.
In the collections world, it is helpful to simplify matters by dividing the world into two distinct types of organisation, each with its own DGR endorsement procedures:. The ruling acknowledges that there is no definition of these terms in the Income Tax Assessment Act Cth.
While the words are to be understood in their ordinary or everyday meaning the ATO will expect a public library, public museum or public art gallery to have the following features:. The ruling accepts that the collection of a library, museum or art gallery as being available to the public where it is for use by the public or a section of the public.
If such access is minor, the institution is not public. On the other hand, it is not necessary that a collection be made indiscriminately available.
Limitations on access can be consistent with availability to the public where they are to protect the collection, ensure orderly access and efficient operation. Indeed this has interesting consequences for it means that even if a collection is made available only to a particular section of the public,  it can still be treated as a public collection.
However, the charging of appropriate fees is not, in itself, inconsistent with being a public library, museum or art gallery. The real question to be asked is purposive: To be eligible to receive deductible gifts under div 30 of the Act, the public library, public museum or public art gallery must be in Australia. If a facility, recognised as a library, museum and gallery, is established in Australia and makes its collection permanently available to the public in Australia, the ATO accepts that it is in Australia.
Borrowing from and temporarily lending exhibits to overseas public libraries, museums and galleries, do not, in themselves, prevent an institution from being described as being in Australia.
It does not matter whether the organisation is a company, association, trust or government body — but it must have a formal structure. It cannot be an individual or a partnership. The institution must be recognised and managed as a public resource. If it is not a government or quasi-government institution it must be controlled by people that have a responsibility to the community arising from their position within the community.
Where the purpose and activities of the entity are wholly those of a library, museum or gallery, there is little difficulty. But what is the effect of running, say, the gallery shop? This activity is clearly commercial and while associated with the collection and exhibition purposes of the collection, is distinct from it.
This issue is cautiously recognised by the ATO. Even more complicated is the situation where the principal entity is not a public library, museum, or art gallery, but is an organisation that operates such a collection as a minor part of its larger commercial purposes.
A ready example might be a museum operated by and within a large mining company. Clearly the principal purpose of the organisation is commercial and is not that of operating a public museum, gallery or library. To deal with this conundrum the ATO ruling has provided the following guidelines:. Although it is sad for an author to admit, the starting point for finding information in the Cultural Gift Program is the Commonwealth government website.
However, for those readers who just want a general overview, read on. The purpose of the Cultural Gifts Program is to encourage the making of gifts of significant cultural material to public museums, galleries and libraries.
It crosses the boundaries of two federal departments: There are three distinct but related parts to the structure:. The Minister responsible for the arts is responsible for the day-to-day administration of the program up to the stage where a donor claims a deduction, and then the process becomes the formal responsibility of the ATO. The Minister responsible for the arts appoints an expert committee, the Committee on Taxation Incentives for the Arts , which advises the Minister, the Departmental Secretary and the Commissioner of Taxation on the operation of the program.
Where a gift is made under the Cultural Gifts Program the donor not only obtains a tax deduction to the approved market value of the gift but also obtains a capital gains tax exemption in relation to the donation. To obtain the taxation benefits under the Cultural Gifts Program, the gift must be made to a public collecting institution with DGR status and the collecting institution must be willing to accept the gift.
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Accordingly, the first step for any donor is to find a collecting institution that wants the gift. The would-be donor and the management negotiate the terms of the gift. The institution then arranges the material to be valued. These valuations must be:.
One way of becoming a DGR is to be registered on the Register of Cultural Organisations ROCO. Cultural bodies eligible for listing on the Register are those whose principal purpose is the promotion of one or more of the cultural activities specified in sub-div F, sub-s 2 of the Income Tax Assessment Act Cth the Act: The ROCO is not the appropriate avenue for collecting institutions to attain DGR status.
However there are many organisations that are related to collecting institutions that are listed on, or may be eligible for, the ROCO. In brief, the collecting organisation gets its DGR status under the Cultural Gifts Program while related professional bodies and support organisations may be eligible for the ROCO. There are a number of important restrictions placed on organisations on the ROCO, for example, bequests under a will are not tax deductible; and registered organisations or funds cannot accept donations on behalf of another non-registered organisation or individual.
This last point creates much confusion. How can the DGR reinforce the generous behavior and thank its donors, without endangering the tax deductibility of the benefaction? An acknowledgment that a recipient makes in appreciation of a payment can be consistent with the payment being a gift. Other acceptable forms of acknowledgment include stickers, mention in a newsletter or periodical, and plaques if they are of small cost and prominence.
However, enlarging the acknowledgment into forms of advertising would prevent the payment from being a gift. For example, the following payments are not gifts:. To be tax deductible, a gift must fall within one or more of the following gift types.
For each gift type, this section explains the types of gifts covered, the types of DGRs that can receive the gifts, and valuation issues.
It can be in Australian or foreign currency and can be made in cash, cheque, credit card or electronic transfer. It does not cover gifts made under a will. Gifts of money can be made to any DGR. Any kind of property may be gifted. There are particular rules that apply depending on whether the property was purchased more or less than 12 months prior to the gift.
This gift type applies to all types of DGR except for gifts to the Commonwealth for the purposes of Artbank. In general, if the purchase occurred less than twelve months prior to the gift, the amount of the deduction will be the lesser of:. If the purchase occurred more than twelve months from the date of the gift, the amount of the deduction will be the value of the property as determined by the ATO at the time of the gift.
For donors who are registered for GST, or are required to be registered, the amount paid is reduced by the amount of the GST credit if any. This is because the donor effectively receives a refund of the GST paid on purchasing the gifted property. If GST was not included in the price of the property purchased by the donor, no adjustment would be made. Examples are purchases from businesses that are not registered for GST and not required to be registered.
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For donors who are not registered for GST, and not required to be registered, the amount paid is not adjusted to exclude GST. Similar to property donations, there are rules that apply to the valuation of the shares depending on whether they were purchased more or less than twelve months from the date of the donation. This gift type covers gifts of culturally significant property except property that is an estate or interest in land or in a building or part of a building made under the Cultural Gifts Program.
The property must be accepted by the DGR for inclusion in a collection it is maintaining or establishing. For Artbank, the property must be accepted by the Commonwealth for inclusion in a collection maintained or being established for the purposes of Artbank. Where the written valuations for the property do not fairly represent the GST-inclusive market value of the property, the deduction is adjusted to the GST-inclusive market value on the day the gift was made.
An example could be property purchased with a profit-making intention that is later disposed of by gift. The valuation of the gift is the amount paid for the property, or if the property had been manufactured or created, the amount allowable as a tax deduction if it had been sold by the donor. If the donor is registered for GST, or required to be registered, these amounts may need to be adjusted. For this gift type, donors can make an election to spread the deduction over a period of up to five years.
A gift deduction is reduced by a reasonable amount if property is donated subject to conditions on the ownership, custody and control of the property. Gifts of property made under the Cultural Gifts Program are exempt from capital gains tax. Any capital gain or loss made from such gifts is disregarded.
This rule does not apply if the donor or an associate of the donor later acquires the gift for less than market value. The gift must be accepted by the National Trust body for the purpose of preserving it for the benefit of the public. The general rule is that the valuation of the gift is the average of the written valuations provided by valuers approved by the Department of the Environment, Water, Heritage and the Arts DEWHA. For example a library can operate as a reference collection only.
It is essential that reference be made to this document when considering application for participation in the Cultural Gifts Program. Much of the information in this section is derived from that official document. Ibid at p In order to qualify for a deduction of the current market value, the donor must have held the item s in their personal collection for a period of at least twelve months.
See p 19 of the Cultural Gifts Program Guide. Donors who are US citizens can get a tax deduction in the US by donating to a company established in Delaware that has been given tax-deductible status by the US Government.
Of course that does not mean that the US company is itself a DGR: See Summary chart on p 15 of the Cultural Gifts Program Guide. Mail will not be published required. You can use these tags: The relationships are also based on completely different tax principles: Deductible Gift Recipient STATUS If a gift is to be tax deductible, the recipient organisation must be endorsed as a DGR. In the collections world, it is helpful to simplify matters by dividing the world into two distinct types of organisation, each with its own DGR endorsement procedures: While the words are to be understood in their ordinary or everyday meaning the ATO will expect a public library, public museum or public art gallery to have the following features: To deal with this conundrum the ATO ruling has provided the following guidelines: Purpose and administration The purpose of the Cultural Gifts Program is to encourage the making of gifts of significant cultural material to public museums, galleries and libraries.
There are three distinct but related parts to the structure: How organisations apply to participate in the program To participate in the CGP, a collecting institution must apply to the secretariat. These valuations must be: Limitations on deductions There are a number of limitations built into the system: Cultural Organisations that are not collecting organisations One way of becoming a DGR is to be registered on the Register of Cultural Organisations ROCO.
To qualify for endorsement as a DGR the cultural organisation must: The legal ownership of the asset must change hands. It cannot be some form of loan. The transfer is made voluntarily: If it is a true gift, the owner must choose to transfer ownership. For example, a requisition cannot be a gift. The transfer arises by way of benefaction: This one is a little hard to test. However, one can say that this is one factor that distinguishes a donation from a sponsorship; and The donor must not receive any other benefit from the donation , other than the tax-deductibility of their donation.
For example, the following payments are not gifts: Gift types To be tax deductible, a gift must fall within one or more of the following gift types. Recipients This gift type applies to all types of DGR except for gifts to the Commonwealth for the purposes of Artbank. Valuation In general, if the purchase occurred less than twelve months prior to the gift, the amount of the deduction will be the lesser of: Valuation The value of the gift is the market value of the trading stock on the day the gift was made.
Recipients This gift type applies to the following DGRs: DGRs that are public libraries, public museums, public art galleries or institutions consisting of two or more of these; DGRs endorsed as DGRs for the operation of a public library, public museum, public art gallery or an institution consisting of two or more of these; the Australiana Fund; and the Commonwealth for the purposes of Artbank.
However, if the property was acquired for the purpose of giving it away, acquired subject to an arrangement that it would be given away, or acquired otherwise than by inheritance less than one year before making the gift, the valuation of the gift is the lesser of the amount the donor paid for the property and the average of the written valuations. Conditional gifts A gift deduction is reduced by a reasonable amount if property is donated subject to conditions on the ownership, custody and control of the property.
Capital gains tax exemption Gifts of property made under the Cultural Gifts Program are exempt from capital gains tax. This gift type covers gifts of places included in: Places included in these lists are: This gift type does not cover gifts made under a will. This gift type applies to DGRs that are National Trust bodies. Name required Mail will not be published required Website.
This publication is supported by the Australian Government represented by the Department of Regional Australia, Local Government, Arts and Sport. Other conditions see chapter 3. Type of gift see chapter 6. Public fund on the Register of Cultural Organisations —See Public fund on the Register of Cultural Organisations. Public library See Public library, public museum and public art gallery.
Public museum See Public library, public museum and public art gallery. Public art gallery See Public library, public museum and public art gallery. Institution consisting of a public library, public museum and public art gallery or of any two of them See Public library, public museum and public art gallery.