Publications
Department of the Environment and Water Resources
Updated as at November 2008
Thanks to changes to taxation legislation, increasing numbers of Australians are receiving financial benefits from donations to assist in conserving Australia's environment and heritage.
For example, with the Australian Government's changes to the Income Tax Assessment Act 1997, taxpayers now benefit from donations of property valued at more than $5000 to relevant organisations.
Changes to the capital gains tax (CGT) treatment of payments for entering into conservation covenants, and the conservation covenant deduction measure legislated in October 2001, provide further complementary incentives for conservation.
These measures are aimed at encouraging donations of property to eligible environmental bodies. Donors benefit from the capacity to claim tax deductions on the donation.
Deductions may be apportioned over up to five years so that tax benefits are not lost when a donor's income in a single year is less than the value of the gift. (Note: a deduction under this provision can not result in an income tax loss.)
This is particularly important for donors who are asset rich but on low incomes. For example, a gift of land worth $100,000 can be split into five deductions of $20,000 and claimed over five subsequent years, allowing greater tax deductions to be claimed, particularly for those whose incomes are less than the value of the donation.
Any taxpayer (for example, an individual, trust, or company) can claim a deduction for a donation of property and seek apportionment of tax deductions. However, other regulations such as company and trust laws/legislation may impact on the ability of an entity to make a donation of property.
Land, buildings, shares, vehicles, machinery etc valued at over $5000 by the Commissioner of Taxation may be donated.
An eligible environmental body is one that is on the Register of Environmental Organisations (the Register). The Register was established in 1992 to remove the need for amendments to the tax law every time an environmental organisation was granted tax-deductible status. Entry on the Register allows an environmental organisation to seek tax deductible donations.
For gifts or donations made on or after 1 July 1999:
It is in an environmental organisation's best interest to obtain deductible gift recipient status so that donors can take advantage of the new tax initiatives.
For information contact the Register of Environment Organisations (see below) or visit http://www.environment.gov.au/pcd/ppu/reo/
In October 2001, the Government amended the deduction and CGT provisions of the tax law in relation to entering into a perpetual conservation covenant.
The amendments provide for two types of tax concession:
The tax deduction will be available from 1 July 2002, whereas the new CGT provisions have been backdated to 15 June 2000 (where the landowner receives money or property for entering into the conservation covenant) in order to cover payments made under the Tasmanian Private Forest Reserve Program.
For those landowners who do not receive any money or property for entering into a conservation covenant but are not eligible for the deduction, the current CGT provisions remain in place to ensure they are not disadvantaged.
To qualify for a deduction, a conservation covenant must:
A landowner will not be eligible for a deduction if they have received any money, property or other material benefit in return for entering into a conservation covenant. Landowners will need to have the decrease in market value of their land, and hence the amount of the deduction, determined by the Australian Valuation Office. The Office may charge a fee for this service, which is tax deductible. Landowners will be able to spread the value of the deduction over five years using the process outlined above.
To avoid disappointment, before entering into a conservation covenant, landowners should confirm that the proposed holder of a conservation covenant is an eligible organisation and the program of conservation covenanting is one approved by the Australian Government Minister for the Environment, Heritage and the Arts. To determine if the proposed holder of a conservation covenant is an eligible organisation you can call the Australian Taxation Office on 13 28 61 or contact the Register of Environment Organisations (see contact below). To find out if the program of conservation covenanting is one approved by the Australian Government Minister for the Environment and Water Resources call the Department of the Environment, Heritage and the Arts on (02) 6275 9290.
Where a landowner is eligible to claim a deduction for granting a conservation covenant, the CGT provisions (below) will apply.
The CGT provisions have been changed in relation to conservation covenants.
The CGT treatment applies where a landowner:
In both cases, the covenant has to be entered into as part of an approved conservation covenant program or approved directly by the Minister for the Environment, Heritage and the Arts.
Conservation covenants which are not eligible for the new treatment will be treated in the same way they were before - that is, a capital gain will arise equal to the difference between the money and/or property received and the costs incurred in granting the covenant. If no money or property is received, a capital loss equal to the costs incurred in granting the covenant will arise.
For the case where a landowner receives money or property for granting a conservation covenant, the following benefits apply. The CGT treatment will result in a reduced capital gain because a portion of the cost base of the land is taken into account in working out the capital gain (previously the capital gain equalled the amount received for the covenant less incidental costs).
Landowners are also able to access any CGT concession or exemption that may apply to the capital gain. For example, a capital gain from a covenant granted in respect of land owned before 20 September 1985 will now be exempt.
In addition the CGT discount may now apply if the land has been owned for at least 12 months or the small business concessions may apply if the relevant conditions are satisfied.
The CGT changes recognise that, economically, the landowner has suffered some loss in the value of his/her land by entering into the conservation covenant. Therefore, when determining the amount of a capital gain from the grant of a conservation covenant, a portion of the cost base of the land will now be taken into account.
This treatment is equivalent to that applied to the sale of part or all of the land or, in some cases, the removal of trees from the land.
The Department of the Environment and Water Resources has developed guidelines and procedures for the approval of covenanting programs. Guidelines are available on the internet at: http://www.environment.gov.au/biodiversity/programs/covenanting/index.html
The guidelines describe the elements required to be met for conservation covenanting programs to gain approval by the Minister for the Environment, Heritage and the Arts. Approval procedures are also documented.
Please direct any queries in relation to approval to the Department of the Environment, Heritage and the Arts officers listed below.
| Area of interest | Contact |
|---|---|
| Conservation Covenants |
Department of the Environment, Heritage and the Arts Australian Taxation Office |
| Register of Environmental Organisations | Department of the Environment, Water, Heritage and the Arts John Heagney Register of Environmental Organisations Department of the Environment, Water, Heritage and the Arts GPO Box 787, Canberra, ACT, 2601 Ph: (02) 6274 1467 Fax: (02) 6274 1858 Email: reo@environment.gov.au Internet: http://www.environment.gov.au/tax/reo/index.html Department of the Environment, Water, Heritage and the Arts GPO Box 787, Canberra, ACT, 2601 |
| Valuation of property | Australian Valuation Office Philanthropy Program, Australian Valuation Office Phone: (02) 6229 3401 or (08) 8218 9008 Fax: (02) 6230 5060 or (08) 8212 6090 PO Box 911 Dickson ACT 2602 |
| Taxation legislation |
The Income Tax Assessment Act 1997 can be viewed at http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/ The Explanatory Memorandum to the conservation covenant provisions can be viewed at http://law.ato.gov.au/atolaw/index.html |
| Apportionment of deductions | Information and forms can be obtained on the Internet at: http://www.environment.gov.au/tax/apportionment.html Alternatively, you can contact the Department of the Environment, Water, Heritage and the Arts to ask for a form to be sent to you: Ph: (02) 6274 1467 Email: reo@environment.gov.au |