Donating to charity not only supports the vital work of an organisation or group, but it can have positive side-effects when it comes to claiming tax deductions. To be eligible for a tax credit, you need to make sure that your contributions meet certain conditions, and that you’re making a legitimate claim.
In general, when a charity is an approved donee organisation or registered as a ‘deductible gift recipient’ (DGR), and you donate over a certain amount, you can claim a tax deduction. You can find out if a charity is a DGR organisation by checking their website, calling them, or searching the register for charities.
But, be careful. There’s a difference between making a donation and making a contribution. When you’re making a donation, you must be doing so willingly, without receiving any ‘material advantage’. This means that you can’t be getting anything in return for your cash. So no chocolate bars, no raffle tickets, no movie tickets and no fancy dinners. If you receive anything after handing over your cash, then this is considered a contribution, and you should not claim this as a tax deduction.
Other situations which are commonly misunderstood to be donations are membership fees, expenses incurred by providing volunteer work (or the value of the time spent doing that work), donating gift vouchers, or money donated through a will.
The last two things you need to know are that a tax deduction for most gifts is claimed in the tax return for the income year in which the gift is made. However, in some circumstances, you can spread the tax deduction over five income years. And, just like any other tax deduction you’re hoping to claim, you’ll need to get and keep the receipt for your donation.
The tax department sometimes demands repayment for ineligible deductions. So, as with all things tax, it’s best to avoid penalties by checking in the with the experts.
Talk to us about your charitable donations and ensure you keep receipts for the payments you have made.