Deducting gifts and donations: getting it right at tax time
• Deductions, Gifts,
Have you made charitable gifts or donations in the past financial year? The good news is that these items are often deductible, giving many Australians a welcome boost to their tax refund. However, not all gifts and donations are deductible, and special rules apply in some cases. Make sure you know the rules this tax time.
When gathering your donation receipts at tax time, it’s important to understand what can and cannot be claimed as a deduction in your tax return. The first general rule is that a donation of money of $2 or more may be deducted if the donation was made to a “deductible gift recipient” (DGR). A DGR is an entity that has registered with the ATO as being eligible to receive deductible gifts and donations. You can look up the DGR status of an organisation on the ABN Lookup website.
Some charities may not have DGR status, so check if you’re unsure. Many online crowdfunding platforms are also not DGRs, which means you typically won’t be able to claim your donation towards fundraising for individual causes, such as someone’s funeral or medical costs. However, platforms like GoFundMe also run campaigns for DGRs and may certify a particular fundraiser as deductible for Australian tax purposes. Check with the platform, or contact your accountant for advice.
The second general rule is that a donation is only deductible if you did not receive a benefit in return. This means you can’t make a claim if you received things like raffle tickets or items that have an advertised price, such as toys and food items. However, you may receive a “token” promotional item such as a sticker or lapel pin and still qualify for a deduction. Note that donations to a school’s building fund won’t be deductible if you received benefits such as reduced school fees or a certain placement on a waiting list in return for the donation.
Special types of gifts
Some gifts and donations are subject to special rules. In these cases, you should seek expert advice about the deductibility of these items:
- gifts and donations to political parties and independent candidates;
- gifts of shares or property; and
- gifts under the cultural gifts program, and heritage gifts to a national trust organisation.
Record-keeping requirements
Small cash donations totalling up to $10 don’t require a receipt. However, beyond that you must be able to provide evidence of your claim. You aren’t required to keep an original paper receipt, provided you keep an electronic copy that is a true and clear reproduction. If you don’t have a receipt, you may be able to substantiate the claim with other documentation such as a bank statement evidencing the donation.
If you make donations through a “workplace giving program” operated by your employer, you can simply claim the amount of donations shown in your income statement or payment summary. You can claim this deduction in your tax return regardless of whether your employer has reduced the tax withheld each pay period. In both cases, your gross salary or wages and deductible donations for the year will be the same, but any difference in the tax withheld during the year will factor into your eventual tax refund. Workplace giving programs are not the same as a salary-sacrifice arrangement as they do not lower your gross salary or wages.