Deep Dive: Tax Deduction For Donations

Australians are generous by nature so it is no wonder that on nearly every tax return we prepare that there is a deduction included for donations.

BUT not every time is money you hand over for a worthy cause tax deductible. At some time most of us have participated in fundraising where:

• items have been auctioned, sold or raffled,

• events, dinners and gala events,

• buckets being handed around at sporting and social events,

• given to a friend’s Go Fund Me page to support someone in need through a horrific life event.

There is often some confusion in these types of situations as to what can and can’t be claimed as a tax deduction. So why does it matter how the funds are raised and received when it comes to claiming a tax deduction?

In short you can only claim a deduction, in your tax return, for donations made to a tax deductible gift recipient (DGR) where they issue you a receipt stating that donations of $2 or more are tax deductible. The only exception to this is where you make a donation of $2 or more to a bucket collection conducted by a DGR for natural disaster victims where you can claim up to $10 without a receipt.

What is a deductible gift recipient (DGR)?

A DGR is an organisation that has been approved to receive donations that are tax deductible. You can find out the DGR status of an organisation by searching ABN Lookup, by simply typing in the name of the organisation to which you wish to make a donation.

Can I claim a deduction for raffle tickets, events, auction items and other merchandise?

Unfortunately you cannot claim a tax deduction for any items that provide you with a personal benefit, even though what is purchased may greatly exceed its monetary value. So sadly there is no deduction available for raffle tickets, events, auction items and merchandise.

What are some examples of DGR’s?

If you are thinking that you would like to make your donation go further and claim a tax deduction, some common DGR’s are:

• Australian Red Cross

• Salvation Army

• St Vincent de Paul

• NSW Rural Fire Service

• RSPCA

• WIRES

For all other organisations checkout their DGR status first by searching ABN Lookup.

Will donations made to Go Fund Me be tax deductible?

In most instances donations made through Go Fund Me and similar platforms won’t be tax deductible. An example of an exception to this are donations made through Celeste Barber’s crowdfunding platform were tax deductible. Donations were made to the Paypal Giving Fund which is listed on ABN Lookup as a DGR. Paypal forwards funds raised to the nominated DGR, in this case it was the NSW Rural Fire Service. However it is worthy to note that Paypal does charge a fee for donations of between 2.2% to 2.9% plus $0.30 for every transaction, so it may be worthwhile to donate directly.

The rule of thumb before making any donation is to check the fine details before committing your hard earned cash to a cause.

Do I need to keep a record of my donation?

As with all tax deductions, you must keep your receipt as proof that you made the donation otherwise your donation isn’t eligible for deduction. The receipt will state that donations of $2 or more are tax deductible. Your receipt must be kept for 5 years, in the event that you are audited.

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Disclaimer: This is general information only and is not advice of any sort. No warranty or representation is provided by Accounting Heart Pty Ltd as to the accuracy, currency or completeness of the information contained in this blog. Readers of this blog should not act or refrain from acting in reliance upon any information contained herein and must always obtain appropriate taxation and / or other advice as may be appropriate having regard to their particular circumstances.