Making Charitable Donations: What’s Tax Deductible?

Due to the recent historic flooding in Queensland and New South Wales, as well as the ongoing war and humanitarian crisis in Ukraine, thousands of Australians have been making donations to relief organisations. Many of these charitable donations are tax deductible – but what’s allowed and what isn’t?

The ATO outlines all the guidelines for tax deductible donations, but here’s a basic overview of the rules:

  1. You can only deduct donations made to a deductible gift recipient (DGR)

    A deductible gift recipient, or DGR, is an entity or fund that can receive tax deductible donations. Renowned not-for-profit organisations such as the Red Cross and UNICEF qualify, but not all charitable organisations are DGRs – for instance, gifts made to crowdfunding sites like VentureCrowd may not be eligible. To check on eligibility, you can visit the ATO’s website and do a search for DGR endorsement.
  2. You must donate money or property

    Your gift to a DGR must be worth $2 or more, and it must be either a financial donation (which includes cash or financial assets like shares) or property. The definition of “property” for tax purposes is complex and there are special rules depending on the item’s value and when it was originally purchased.
  3. The donation must be a “true” gift

    In order to be deductible, you must make a freewill gift of money or property without receiving anything in exchange. For instance, if you buy tickets to a charity dinner, you can’t deduct the total cost of the tickets because you’re receiving a meal, and possibly entertainment, as part of the cost. (Note: Small promotional or “token” items given to donors by the DGR, such as stickers or pens with the charity’s logo, etc, are exempt.)
  4. “Buckets” through another business are acceptable – with some restrictions

    Sometimes, for-profit businesses will do a fundraiser or collect donations for a not-for-profit organisation, such as “bucket” collections at a cash register or reception desk.  (Another type of example is the recent Australia Unites: Red Cross Flood Appeal telethon event that was promoted and hosted by three Australian television networks – however, in this case, most donations went directly to the Red Cross and were not “funnelled” through the stations.)

Donations made through these kinds of collections and events are allowed and you can claim a donation of under $10 without a receipt. However, for larger gift amounts, you’ll want a copy of a receipt or a confirmation of the donation for your records.

Finally, donations of cash or value over $2 that are made to political parties, candidates or campaigns may be allowed (up to a limit of $1,500), but a receipt is required and there are additional restrictions outlined on the ATO website.

In short, tax deductions for donations are not always a “given” and tax rules change frequently, so if you still have questions, contact the experts at Accru today. 

About the Author
Richard Bowden
Richard has since applied his skills to many scenarios, especially complex tax. He now leads the tax division at Accru Harris Orchard. He ultimately sees his role as being one of optimising the tax and financial position of his clients, whilst managing their exposure to risk.
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