Opinion Number. 763

Subject

INCOME TAX WHETHER GIFTS OF DEBENTURES AND WAR LOAN BONDS ARE DEDUCTIBLE AS MONETARY CONTRIBUTIONS

Key Legislation

INCOME TAX ASSESSMENT ACT 1915, s. 18 (1) (h)

Date
Client
The Acting Commissioner of Taxation:

The Acting Commissioner of Taxation has forwarded the following memorandum for advice:

Section 18 (1) (h) of the Income Tax Assessment Act deals with deductions which may be made from the total income of a taxpayer, and provides for the deduction of- . . . contributions exceeding Five pounds in the aggregate in respect of each object of contribution made during the continuance of the present war to any public fund established in any part of the King's Dominions or in any country in alliance with Great Britain for any purpose connected with the present war:

Provided that payments shall not be allowable as deductions under this paragraph unless verified to the satisfaction of the Commissioner.

The Department, with the approval of the Government, has interpreted this section as limiting deductions to cash contributions and excluding contributions in kind.

There is some doubt as to whether gifts of debentures and War Loan bonds are to be classified as gifts in kind or as a monetary contribution.

As this question is likely to enter largely into future assessments, I should be pleased to have your early opinion in the matter.

Gifts of debentures and War Loan bonds are, I think, monetary contributions. They cannot be classed as gifts in kind, as the debenture or War Loan bond has no intrinsic value but is the evidence of money owing to the holder. The transfer of the debenture or War Loan bond is a transfer of the money, for which the debenture or bond is evidence, that is due by the authority giving the debenture or bond.

In my opinion, gifts of debentures or War Loan bonds aggregating the amount required in paragraph (h) of section 18 (1) are deductible.

[Vol. 15, p. 48]