Charitable giving and the holiday spirit go hand in hand at the end of the year, with plenty of information about the taxable consequence of donations available to taxpayers.

But are there other tax benefits available for donations besides a straightforward deduction?

WHEN CAN A DEDUCTION BE CLAIMED
Firstly, a tax deduction is only available for donations of $2 or more that are:

• Made to a deductible gift recipient (DGR)
• Made without receipt of material benefit or advantage (eg buying a raffle ticket or items at a charity auction)
• Evidenced by a record of donation

Whether or not an entity is classified as a DGR can be searched on the ABN Lookup, with some entities classed as such concerning a particular fund, authority or institution that it operates. No tax deduction is available for donations made to social media or crowdfunding platforms unless the platform is a registered DGR.

Charitable giving and the holiday spirit go hand in hand at the end of the year, with plenty of information about the taxable consequence of donations available to taxpayers.

But are there other tax benefits available for donations besides a straightforward deduction?

WHEN CAN A DEDUCTION BE CLAIMED
Firstly, a tax deduction is only available for donations of $2 or more that are:

• Made to a deductible gift recipient (DGR)
• Made without receipt of material benefit or advantage (eg buying a raffle ticket or items at a charity auction)
• Evidenced by a record of donation

Whether or not an entity is classified as a DGR can be searched on the ABN Lookup, with some entities classed as such concerning a particular fund, authority or institution that it operates. No tax deduction is available for donations made to social media or crowdfunding platforms unless the platform is a registered DGR.

HOW CAN DONATIONS OCCUR

DEDUCTION AS A NORMAL BUSINESS EXPENSE
Subscriptions and donations to various kinds of organisations purely for business purposes, for example, as a form of advertising, may be deductible as an ordinary business expense. Similarly, a business that supports a DGR through advertising or sponsorship may be entitled to a tax deduction as a business expense.

SALARY-SACRIFICING ARRANGEMENTS
As an employer, you can arrange and facilitate donations to DGRs for their employees (with their consent) through workplace giving programs or salary-sacrifice arrangements.

Under a workplace giving program, an employer forwards a portion of an employee’s salary to a nominated DGR (for example, $20). The employee claims a deduction for the donations in their tax return and may be eligible to have PAYG withheld at a lower rate.

Under a salary sacrifice arrangement, an employee agrees to have a portion of their salary donated to a DGR in return for the employer providing them with benefits of a similar value. The employer generally incurs no FBT, but the employee cannot claim the deduction.

POLITICAL CONTRIBUTIONS
There are additional conditions that apply for donations (including membership fees) to political parties, independent candidates and members of political parties. Individuals can claim back up to $1,500 from donations made to a party or candidate, but businesses cannot claim a deduction for the same donations made. They may be subject to FBT if they donate on behalf of an employee.

CROWDFUNDING PLATFORMS
A business may be entitled to an input tax credit for such a payment if it is registered for GST and the acquisition is made for a creditable purpose, eg where advertising rights are received in return. If payments are made toward a crowdfunding campaign in exchange for goods, services or rights, these are not considered donations.

WHAT RECORDS NEED TO BE KEPT?

Taxpayers should keep records of all tax-deductible donations made. DGRs will typically issue a receipt for donations made, however, there is no requirement for a DGR to provide a receipt.

If you made donations of $2 or more to bucket collections – for example, to collections conducted by an approved organisation for natural disaster victims – you can claim a tax deduction for gifts up to $10 without a receipt. To claim contributions of more than $10, you need a receipt.

Donations made through a workplace giving program can be evidenced by an employee’s income statement or
payment summary or by written records from the employer.