Income tax: can the making of a gift under the Taxation Incentives for the Arts Scheme create or increase a carry-forward loss?

No. Section 79C of the Income Tax Assessment Act 1936 (the Act) provides that the making of any gift under section 78 of the Act - which includes a gift made under the Taxation Incentives for the Arts Scheme - can neither create nor increase a loss for carrying forward to a subsequent income tax year. Example: Z has assessable income of $30,000 during a particular year of income. During the same year Z donated a painting valued at $35,000 to a public art gallery under the Taxation Incentives for the Arts Scheme. The painting was from Z's private collection and did not form part of Z's trading stock. Z had no other deductible expenses for that year of income. Z's taxable income for the particular year of income would be reduced to nil. The unused balance of $5,000 cannot be carried forward to a subsequent year.