How to support the charity of your choice while claiming a tax deduction

With Australians expected to make charitable donations to support flood impacted areas, the Australian Taxation Office (ATO) urges taxpayers to make sure that if they want to claim a deduction in their tax return for a donation, it meets the criteria to be tax deductible.

We know Aussies are very charitable and after the recent floods, we are expecting to see a lot of donations and deductions in tax returns this year. In the 2019-20 year, 4.2 million Aussies claimed deductions for $3.7bn in gifts and donations to charities and not-for-profits.

Why should Aussies know before cutting their checks?

Before rushing to claim a donation in your tax return, it’s vital to understand what makes a donation tax deductible. The donation needs to be made to a deductible gift recipient (DGR).

Firms or funds endorsed as DGRs are entitled to receive tax deductible gifts or donations. Not all charities and not-for-profits are DGRs. DGRs are either endorsed by the ATO, or in exceptional cases listed by name in the tax law. Additionally, many crowdfunding campaigns that raise money for charitable causes and individuals in need, are not run by DGRs.

We know crowdfunding campaigns are growing in popularity, but they may not be run by a DGR, so it is vital to check whether your charitable gift will be deductible at tax time. Taxpayers can confirm a firm’s DGR status by checking the ABN Lookup on business.gov.au.

Further, in return for your donation, you can only accept items that would be considered promotional advertising for the DGR like pens, wristbands or badges. If you receive something in return for your donation, for example you make a gold coin donation for a sausage sizzle or buy goods from an Op Shop, this isn’t considered a tax-deductible gift.

Most importantly, you must have a record of your donation. Most DGRs will usually issue you with a receipt, but they don’t have to. We will accept third-party receipts as evidence if the receipt identifies the DGR and clearly states that the amount is a donation.

If you made donations of $2 or more to bucket collections conducted by a DGR for natural disasters, you can only claim a tax deduction of up to $10 for the total of those contributions without a receipt. We want to make it easier for you to support the charity of your choice.

How can Aussies claim their tax deductions?

The myDeductions tool in the ATO app can store photos of donation receipts throughout the year. Upload your donation information to myTax or send them through to your tax agent.

The Australian Taxation Office may ask a taxpayer to provide evidence to support their claim, or amend their tax return to remove the claim. Last year, we had to adjust a large number of charitable claims because the taxpayer incorrectly claimed the donation.

Unfortunately, this will delay the tax return from being finalised and any refunds being issued. So, if you are claiming a donation this tax time, make sure it’s tax deductible, you didn’t receive anything of personal use in return, and you have a record of the donation.

For those that have had their tax records lost in the floods, we are here to help you reconstruct them so you can be prepared this tax time. If your records have been damaged, destroyed or lost, there are a number of ways we can help you reconstruct your tax records.

 

Tim Loh is the Assistant Commissioner at the Australian Taxation Office.