Last year, around 4.2 million Australians claimed deductions for more than $3.9 billion in gifts and donations to charities and not-for-profits. Which is great news for charities, but possibly not such great news when it comes to donation tax deductions…
Would you believe nearly two thirds of the charitable tax claims adjusted last year were because the taxpayer could not prove they had made the donation?
According to the Australian Tax Office (ATO) there are four main reasons your donation or gift may not be tax deductible.
1. The charity is not endorsed by the ATO as a deductible gift recipient (DGR)
Not all charities and not-for-profits are DGRs. A deductible gift recipient is basically an organisation that has been approved by the ATO to receive donations that are tax deductible. There are a few exceptions to this, but they are companies that have been listed by name in tax law.
If you want to make a donation as a tax deduction, it’s worth checking the DGR status directly with the charity itself. You can also confirm an organisation’s DGR status by checking the ABN Lookup on business.gov.au.
Note that many crowdfunding campaigns that raise money for charitable causes and individuals in need are not run by DGRs. So swinging a $100 to your friend’s GoFundMe account to help her out during her breast cancer fight is unfortunately not tax deductible. Putting that money into a charity that supports breast cancer research like The McGrath Foundation or the National Breast Cancer Foundation, which are both registered DGRs, is how you make your donation a tax deduction.
Many people also donate directly to foreign charities or not-for-profits, and these are generally not DGRs. Even if the organisation is a charity listed in another company, unless the organisation is a registered Australian DGR, then any donations you make to it are not tax deductible.
2. You receive or expect to receive a monetary or personal benefit or advantage in return
We know Australians love a raffle or a fundraising chocolate. Sadly, charity chocolate purchases, raffle tickets, something at auction or an item from an Op Shop can’t be part of your donation tax deductions. They are not considered a tax-deductible gift because you’re receiving a benefit.
Basically, any time you receive a benefit in return for your donation, it’s not a tax deduction. So, club membership fees aren’t a donation. Nor are tickets to a charity fundraising dinner. Even if the tickets cost $1000 a pop for dinner.
Naturally, any kind of gifts to family or friends are not considered donation tax deductions. This is for any reason, even when helping them out in a crisis.
More tips here: Tips and tricks to maximise your tax return
3. You don’t have a receipt
Most organisations will usually issue you with a receipt, but they don’t have to. The ATO will accept third-party receipts as evidence of a donation to a DGR if the receipt identifies the organisation and states the fact that the amount is a donation to the DGR.
You can claim up to $10 worth of donations where you don’t have a receipt. So if you dropped $2 or more into bucket collections conducted by an approved organisation, you can claim $10.
Note that you’re not required to keep your original paper receipts. As long as you’ve kept electronic copies that are a true and clear reproduction of the original, you’re good to go. Any donations receipt you keep must show:
- the name of the fund, authority or institution you’ve donated to
- the DGR’s Australian business number (ABN)
- that the receipt is for a gift.
Some quick tips for keeping your receipts in order:
- Make a folder on your computer under “Tax 20/21” called “”charity donations 20/21”
- Save all emailed pdf receipts directly into the folder
- Take a photo of any paper receipts and add them to your folder.
You can also use the ATO app MyDeductions to record your receipts on the go on your phone.
4. Wills or workplace giving
Some people incorrectly claim tax deductions for donations they intend to make in their will. Others claim workplace giving that has already reduced the amount of tax paid in each pay period (ie, salary sacrificing). Both of these provide a personal benefit and are therefore not considered donations tax deductions.
This article contains general information only. It should not be relied on as finance or tax advice. You should obtain specific, independent professional advice from a registered tax agent or financial adviser in relation to your particular circumstances and issues.