Issue
Can the taxpayer claim a deduction under section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses incurred in purchasing an air conditioner for their home unit which will be given to the retirement village in which they reside when they vacate the unit?
Decision
No, the taxpayer cannot claim a deduction under section 30-15 of the ITAA 1997 for expenses incurred in purchasing an air conditioner for their home unit which will be given to the retirement village in which they reside when they vacate the unit.
Facts
The taxpayer purchased an air conditioner for their home unit which is located in a retirement village.
The taxpayer intends to leave the air conditioner in the home unit as a gift to the retirement village when they vacate the unit.
Reasons for Decision
Section 30-15 of the ITAA 1997 allows a deduction for gifts in certain situations.
The question of what constitutes a gift was considered by Owen J in FCT v. McPhail (1968) 117 CLR 111. His honour said at 116, that to constitute a 'gift': 'it must appear that the property transferred was transferred voluntarily and not as the result of a contractual obligation to transfer it and no advantage of a material character was received by the transferor by way of return'.
The taxpayer received an advantage of a material character as they have retained the personal use of the air conditioner until they vacate their home unit. The expense incurred is therefore not a 'gift' for the purposes of section 30-15 of the ITAA 1997 as an advantage of a material character was received.