When you give money to an official charity, your gift can be a tax deductible donation
Tax deductible donations are a great way to give your tax refund a boost while contributing to a worthy cause. Charities rely on the generosity of people’s donations to support them, so they can achieve goals like helping the less fortunate or making a better world.
Like many Australians, you may have a charity or cause close to your heart. And every time you make a donation over $2 to a registered charity, don’t forget that your charitable donation is probably tax deductible.
Here’s what you need to know to correctly claim tax deductible donations on your tax return.
Charitable donations and tax deductions
If a charity is registered by the ATO as a “Deductible Gift Recipient organisation”, then donations you make to that charity may be tax deductible.
You can find out if a charity is a deductible gift recipient organisation by searching the Australian Business Register (more on that below – it is easy to check).
Deductible gift recipient charities usually tell you on their website if donations are tax deductible. If you’re still not sure, ring the charity and ask for proof of their deductible gift recipient status.
When is a donation not a tax deduction?
First of all, if you receive a raffle ticket, dinner attendance, event entry, chocolates, or anything like that, then your donation can’t be claimed as a deduction. Basically, if you receive something because of your donation, then don’t claim the donation as a tax deduction.
Next, if the donation was to an organisation that is not a registered deductible gift recipient, then you can’t claim it, ever.
Donations to churches
Some people assume that gifts to a church are always tax deductible donations. Unfortunately that’s not right, and the ATO sometimes demands repayment from people who claimed ineligible deductions.
Gifts of money to a church (including gifts to a church’s building fund) can ONLY be claimed if the church is a registered deductible gift recipient. Read below to learn how to check if your church is eligible…
How to check if a charity or church is a Registered Deductible Gift Recipient (DGR)
This is easy.
Fist of all, most charities will simply tell you. If they don’t tell you, just ask, “is your organisation an registered Deductible Gift Recipient?” If they say “no”, or they are not sure, then your donation probably isn’t tax deductible. Don’t claim it unless you know for sure that it’s eligible, because the ATO is pretty good at finding ineligible tax deductions.
You can look up the DGR status of any organisation
- Go to the official ABN lookup site at http://www.abn.business.gov.au/AdvancedSearch.aspx
- Enter the name of the charity you want to look up then hit ‘enter’ or ‘search’
- Next you’ll see a list. Find the right one and click on the ABN number link on the left
- Next you’ll see a details page – down toward the bottom you’ll find a sub-heading called “Deductible gift recipient status”. What does it say there?
Let’s look at two examples:
The Smith Family is an Aussie charity helping underprivileged kids to get a better education. If we go to the ABN lookup and enter “Smith Family”, we easily find their profile. Under “Deductible gift recipient status” it says, “THE SMITH FAMILY is endorsed as a Deductible Gift Recipient (DGR) from 01 Jul 2000.” That means, all of our donations to The Smith Family are tax deductible donations.
On the other hand, what if we want to donate money to St Albert’s Catholic School in South Australia? When we look up the school’s name we can see it says, “Not entitled to receive tax deductible gifts.” So, we can give the school money anytime we want to, however, that donation is not a tax deduction.
It’s easy to keep track of your tax deductible donations to charities
Many Australians lose out at tax time simply because they forgot about some deductible donations or lost the receipts. That’s an easy problem to fix!
Here are a few ways.
- Just save every donation receipt right into your Etax account. This way, your receipts are right there at tax time. Here’s how to save receipts and deductions at Etax.
- Start a draft email in your email account called “charity donations”. (You’ll never send this email – it’s just a convenient place to keep a list where you can find it quickly.) Every time you make a donation, just open that draft and add a note including, a) the charity, b) the date, and c) the amount. Then save it. Done! At tax time it’s easy to add-up the donations. And if the ATO or your tax agent asks for details, it’s all right there. Only record donations to real, tax-deductible charities.
(With this method you still need to keep the receipts somewhere – in your email archive is okay as long as you don’t delete them.)
- Keep a simple list of the names of each charity you donate to. Then, at tax time, send each of them an email asking for a summary of your donations in the past taxation year. (This can mean waiting for replies, so option 1 or 2 may be easier.)
- Charities should always provide a receipt for your donation. Whenever you give, watch carefully for that receipt. Then save it in one place that you’ll remember at tax time.
Summary: Which charity donations can I claim on my tax return?
To claim tax deductible donations on your tax return, your donation must be:
- made to a deductible gift recipient charity, and
- $2 or more.
You must also keep proof (in the form of a receipt or bank statement) of any donation you make as well as the total dollar amount of all donations you make in a tax year.
On top of that, it’s important to be aware of the following important notes:
- If you receive something for your donation (e.g. raffle ticket, pen, bandanna), you cannot claim that donation on your tax return. This is because the ATO sees this as a transaction where you receive a good/service in return for the money you donate.
- There are different rules for donating property, shares, and other goods, so please ask us if you are unsure about how to claim these items.
- Some charities have special rules that limit the donation amount you can claim; this should be explained to you or referenced on your receipt so that you know how much of your donation is actually a tax deductible donation.
How do I claim donations as tax deductions?
As long as your donation is $2 or more, and you make it to a deductible gift recipient charity, you can claim the full amount of money that you donated on your tax return. Section D9 on your tax return (Gifts and Donations) deals specifically with charitable donations, so that’s where you should record your donations.
Don’t forget! Like any other tax deduction, you must have a receipt. To make it easier to keep track of your receipts, try the Etax Mobile App. You can snap a photo of your receipt using the app. It will automatically be attached to your Etax account ready for when you do your tax return.