Yes, we’re still months away from Christmas, but let’s follow the philosophy of Australia’s retailers; namely that it’s never too early to start preparing for the festive season. Besides, this article will also discuss the tax implications of making donations to charities, and charitable donations are welcome any time of year!
If you plan on claiming a tax deduction for a gift or donation, there are a few criteria that need to be met:
- First of all, you must be the donor (the person who made the donation).
- The gift needs to be made to a deductible gift recipient (DGR). The ATO decides whether or not a charitable organisation is eligible to be a DGR. Because not all charities are DGR’s it is worth making enquiries before considering any substantial donation that you hope to claim as a deduction. There are also organisations such as hospitals and universities, which aren’t charities, but that may be DGR’s.
- The gift needs to be a gift. If you receive any benefit in return, then your payment isn’t considered to be truly a ‘gift’ and is unlikely to be deductible. This can create problems for events such as charity auctions, because each successful bidder will receive some form or benefit in the form of whatever item or service they won in the auction. Even fundraising dinners fall into this category, as you will receive the benefit of a meal, even if its value is far less than the cost of the ticket! As a result, while the charity will obviously benefit from such an event, the contributors may be disappointed when it comes time to complete their tax return and discover they can’t claim as much as they thought.
- The gift needs to be either money or property, so attempting to claim a deduction for services you provide (for example an accountant can’t claim their normal hourly rate for providing pro bono bookkeeping/accounting services to a charity.
- In certain cases, there may be additional tax law requirements that need to be met. This could be dependent on the type of organisation, the type of gift, or both.
If all of the above criteria are met, what is the minimum you can claim as a deduction? The minimum for gifts of money, as I’m sure you would have seen many times before in your local shopping centre, is $2 (gifts of property vary depending on the circumstances). But remember the earlier point about receiving benefit, because even if you don’t win, a raffle ticket still provides the possibility of benefit and would not be deductible!
By Jennifer Lowe