Generally, when a taxpayer makes a donation (cash or property) to a charity or other deductible gift recipient (DGR) they could claim a deduction. However, if it is a testamentary gift, the deceased estate cannot claim a deduction. Therefore, if you consider making a donation to a charity, it is better done during your lifetime.

A DGR is an organisation entitled to receive income tax deductible gifts and deductible contributions. Many organisations are tax-exempt entities but they do NOT have DGR status (for example, churches or sporting clubs) and, therefore, cannot receive tax deductible gifts.

While the testamentary gift of property to a charity or another DGR is not deductible, the gift is not subject to capital gains tax (CGT). Furthermore, consequent sale of the property will also not attract CGT because the entity is tax-exempt.

It should be noted that some DGRs are not endorsed by the ATO or listed as such in the income tax law but they maintain a fund which is considered as DGR (for example, school building funds and council libraries).

In summary, if you are considering bequeathing a post-CGT property to a church or another tax-exempt non-DGR entity, you may consider setting up a testamentary trust. In this case income produced by the trust will be distributed to the beneficiary (eg. a church) and will not be taxable due to the tax-exempt status of the entity.

The lawyers and tax accountants at The Quinn Group can provide you with advice in this area. Call us on 02 9223 9166, or fill out an online enquiry.