Cultural Gift Program

In Australia, public institutions collect art and artefacts through many avenues, including from private donors. The Government encourages private donations through several federal programs. A major initiative is the Cultural Gifts Program, which affords tax incentives to people who donate to a public institution.

What is the Cultural Gift Program?

The Department of Communication and the Arts administers the Program under Australian taxation law. The Cultural Gift Program offers tax incentives to those who donate cultural items to public museums, libraries, art galleries and archives in Australia. Donors can be any type of taxpayer, including individuals, companies and trusts. A beneficiary under the Program must be a Deductible Gift Recipient, with the exception of Artbank and the Australiana Fund.  The recipient must include the gift in a new or current collection so that the gift benefits the Australian public.

Eligible cultural items

Under the Cultural Gift Program, individuals donate items of cultural and monetary value to public institutions. Examples of eligible gifts include:

• Property and interest in land or buildings;
• Antiques, paintings, books, manuscripts and jewellery;
• Cultural artefacts;
• Indigenous art;
• Film and social history artefacts; and
• Natural and scientific materials.

Cultural Gift Program tax incentives

The Cultural Gift Program does not provide funds directly to the donor or the public institution. Rather, the donor can receive a full tax deduction of the market value of the donation (including GST) over five years against tax due on other income/earnings. The cost of securing a valuation is also tax deductible. Gifts donated under this Program are exempt from capital gains tax. It is important to note that testamentary donations (that is, gifts included in a will or from a deceased estate) are not tax deductible and do not qualify for the Cultural Gift Program. In addition, a donor only financially benefits from the Cultural Gift Program if they are paying income or business tax in Australia. For that reason, a retiree who is no longer paying tax would accrue no benefit from the Program. Donating can also be a lengthy process, as it can take months or years of negotiation as the recipient investigates the provenance, validity and value of the artefact. As a result, donors nearing retirement should consider whether they have sufficient time left in the workforce to gain the full tax relief benefit.

Cultural Gift Program valuations

The donor needs to obtain a valuation of the gift. Generally, the tax-deductible amount is the average of at least two written valuations from approved valuers. However, different rules may apply if the item was acquired for donation, acquired subject to being donated, or acquired (except through inheritance) less than a year before donation. In that case, the valuation is the lesser of either the amount paid or the average of the written valuations.

There is also a different arrangement if the donated item would otherwise have been included in the donor’s taxable income (because it was gifted rather than sold). In that event, there is no need for a written valuation. For example, if someone donates a property that they otherwise would have sold for a profit, the value of the donation is the original purchase price of the property, not the current market value. There are also specific rules for artists who donate their own works to public institutions. It is always wise to seek professional assistance from an accountant and solicitor with expertise in this area prior to pledging a donation.

Conditional gifts

As a rule, public institutions prefer that donations are made without restrictions. A gift is conditional unless the institution takes immediate control and custody of the gift, with unencumbered legal and equitable title, and unconditional right to retain ownership in perpetuity. The value of the gift, and consequently the amount of the applicable tax deduction, may be reduced if the donor places any conditions on the gift. For instance, if someone gives a painting to a gallery but stipulates that the donor retains possession for the next ten years, this reduces the value of the gift for tax deduction purposes. A public institution may even refuse a gift that comes with too many conditions.

Making a donation to a public institution means that your generosity will be recognised, and your name can be listed on a catalogue record. Importantly, there are also practical advantages to donating through the Cultural Gift Program. It is best to consult an accountant on the applicable tax benefits before deciding whether to make a deductible donation. It is equally important to seek legal advice to ensure that you have the legal right to donate the gift and that there will be no implications on your property settlement or deceased estate. Contact Go To Court Lawyers for legal advice about donating to the Cultural Gift Program.