Giving back and helping others can be a great way to bring meaning to your year. If you choose to support a charity by donating money, it’s worthwhile understanding how the tax office treats your charitable donation. Jo and Carl Violeta explain.
We spoke with our friend Sam Keats the Director of Keats Accounting to get the facts on how tax deductions for charitable donations work.
Of course, giving back and helping others isn’t all about what you can get from the tax office, but it makes sense to claim a deduction if you’re entitled to it.
Generally, you have to give cash, rather than buying a product for the donation to be tax deductible. For example, you can’t claim a tax deduction for buying raffle tickets, even if the raffle is in support of a charity. This is because in most cases, you can’t claim a deduction for a gift or donation if you received something in return.
‘There are some exceptions to that rule, for example, Daffodil Day Badges and those sorts of things, but generally monetary donations are deductible, not product purchases,’ explains Sam, ‘Also businesses may be able to claim a deduction for donating stock, your Accountant can guide you in this.’
For a donation to be tax deductible it needs to be an amount of over two dollars. The charity needs to be registered on the deductible gift recipient register. If you look up the organisation you’d like to donate to on the Australian Business Register website, it will tell you whether or not they’re on the deductible gift recipient register.
There are some ways around this, if you run a business you might have more options, so have a chat to your Accountant.
To claim the deduction, you’ll need a receipt from the charitable organisation. You can then claim the deduction on your tax return.
The tax deduction will happen according to the name that is written on the receipt. ‘If you’re partnered, it’s always a good idea to make your donations in the name of the higher income earner, rather than having both names on the receipt. That just means that you’re getting the most back for your donation,’ recommends Sam.
If you’re employed, you may be able to make your donation go further. Sam suggests checking whether your employer has any initiatives in place around corporate giving.
‘Some employers will allow you to set up regular deductions from your pay as a salary donation. Some employers also offer a matching program. For example, anytime my husband makes a charitable donation his employer actually double that donation amount.’
Supporting charities is a meaningful way to bring more joy to yourself and others. Particularly during the time of year when many families are experiencing financial pressure. Charitable donations also make a great gift for those people who are hard to buy for. A donation in their name is a beautiful gift, rather than buying them something they don’t particularly need, it’s making a difference.
*The information in this article is general only. It’s important to speak to your Accountant for advice specific to your circumstances.
About Jo and Carl
Jo and Carl Violeta are self-confessed numbers nerds, parents of an energetic toddler and a super switched-on teenager, and co-founders of the award-winning business, Violeta Finance. They are a husband and wife team who are passionate about empowering their community with financial education, love the odd glass of wine, and get a kick out of helping families achieve their homeownership and financial dreams.