In 2021 Tax Tips

Do you know the difference between deductible donations and non-deductible donations in Australia? This article will help you answer that question.

If you are an Australian taxpayer, then you may be eligible to claim a tax deduction for all or part of the value of your charitable donations. In addition, the government is currently providing incentives for people to donate more money in order to help Australia’s most vulnerable children and their families.

You may be wondering what the difference is between deductible donations and non-deductible ones. The key thing to remember is those deductible charitable deductions are made for income tax purposes, whereas other charitable gifts are not. 

Non-taxable gifts can include things like clothes or food items donated to charities, but they do not count towards your annual limit of $200 worth of allowable deductions. 

It’s important to keep track of all your contributions, so you don’t exceed this limit! If you’re unsure about whether a donation qualifies as a deduction, it’s best to ask an accountant before making any donations.

One of the most important parts of managing your finances is making sure that you have a plan for any spare cash. One way to do this is by setting aside some money for charity. The Australian Tax Office has made it easier than ever before with their guidelines on what counts as a donation and how you can claim them if they’re eligible.  

In this article, we’ll explain what charitable donations are and how you can make them count towards your tax return so that both your wallet and heart feel satisfied!

This blog post contains helpful information on charitable donations in Australia and how to claim them. This article will find out what kind of organisations can accept donations, eligibility criteria for claiming the donation on tax return, how the donation must be made, and more. 

With the end of the financial year in sight, many people are scrambling to work out what they can do with their leftover tax return. Of course, one of the most common things that people use them for is donating money to charity. 

But how do you know which charities are worth donating to? What if you don’t have a lot of spare cash and want to give something smaller? This post will tell you everything about charitable donations in Australia and how to claim them.

If you are interested in learning about how to make a difference with your hard-earned money, then read onwards! 

Charitable Donations

Making a tax-deductible donation is a great way to give back and boost your tax return at the same time.

When you make a donation, your taxable income reduces, which can mean you get more money back on your tax return. Here’s how tax-deductible donations work and how donating can benefit you or your business at the end of the financial year.

1. What is a tax-deductible donation?

A tax-deductible donation is an amount of $2 or more that you donate to a charity that is registered by the Australian Taxation Office (ATO) as a “Deductible Gift Recipient organisation”.

You cannot receive anything in return for your donation. For example, donations in exchange for benefits such as raffle tickets, gala dinners, or prizes, however genuine, are not tax-deductible.

Any donation that meets these criteria is considered a tax-deductible donation, which means you can deduct the amount of your gift from your taxable income on your tax return.

Aspect is registered with the ATO as a “Deductible Gift Recipient organisation“, and therefore any donations towards our programs will be tax-deductible.

2. How much am I allowed to give for my donation to be tax-deductible?

As long as your donation is more than $2, you can claim any tax-deductible donation on your tax return.

3. Are corporate donations eligible?

Yes, corporate donations are eligible for a tax deduction. As a result, businesses can claim the same benefits from making a tax-deductible donation that individuals do.

Similar to when an individual donates, the contribution must be $2 or more in value for a corporate donation to be eligible. The charity must also be registered with the ATO as a “Deductible Gift Recipient organisation”.

Tax time is a great opportunity for your company to practice corporate social responsibility while increasing the business’ tax return.

4. How do I choose a charity to support?

Select a charity that reflects your values and passions or one that supports causes you care about. You’ll feel more comfortable making a donation if you’re connected to the charity through their efforts to make a difference.

You should feel confident in knowing that your donation will be going towards providing life-changing help to those who need it most.

5. How can I be sure the charity is an eligible organisation?

All donations made to a charity or non-profit organisation with “Deductible Gift Recipient” status are eligible for a tax deduction. You can check your chosen charity’s status by visiting the Australian Charities and Not-For-Profits Commission (ACNC) website and checking the charity register.

6. How do I claim charity donations on my tax return?

Once you have made a donation, keep your receipt so you can itemise your tax deductions. When submitting your tax return online or via an accountant, ensure you attach the receipts for your donations for your contributions to be eligible.

If you do not attach your receipts, the ATO may not approve your tax deductions.

Deductible Gift Recipient Endorsement

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A Deductible Gift Recipient is an organisation with a ‘special tax status’. If your organisation is endorsed (officially recognised) by the Australian Tax Office (ATO) as a DGR:

  • people who make gifts or donations to your organisation can ‘deduct’ those gifts for their own income tax purposes (that is, the donor can claim the donation as a deduction when filing their personal income tax return), and 
  • your organisation can receive funds from certain grantmakers and philanthropic bodies, which are only able to give money to organisations that have DGR status
  • So, when you see wording ‘donations over $2.00 are tax deductible’ – the organisation offering this as an incentive to the donor must first be ‘endorsed’ by the ATO as a DGR. In general, unless your organisation is endorsed as a DGR, people donating to your organisation can’t claim their donation against their tax.

If your organisation as a whole is not eligible to be a DGR, it may be that certain activities of the organisation could attract DGR status. 

In these circumstances, it may be worth considering establishing a separate fund or entity, which could be eligible for DGR endorsement. You should seek legal advice on this option. 

Deductible Gift Recipient (DGR) Tool

It can be difficult to understand whether you’re eligible for deductible gift recipient (DGR) status. The legal requirements are complex, the tax laws are complicated, and the language is old-fashioned and daunting. 

That’s why you can use the free DGR tool – to help you make sense of the law. 

Taking less than 20 minutes, this online tool asks all the questions a lawyer would – in simple, plain English – then generates a customised, downloadable report that summarises the information given in the tool. 

The DGR tool will help you understand: 

  • the meaning and benefits of DGR endorsement
  • whether your organisation meets the eligibility requirements for DGR endorsement, and
  • DGR categories that may be relevant to your organisation.

Use the easy-to-understand tool so that your time and energy can be spent on achieving your mission. 

Tips on claiming donations on taxes 

If you’ve made a charitable donation recently, you may wonder about the best way to claim donations on taxes. Every year the Australian Tax Office encourages people to donate to charities by claiming charity donations on tax returns. 

Any donations you’ve made to registered charities can be claimed as a tax deduction on your tax return when you submit it at the end of the financial year.

Anytime you make a donation of $2 or more, you will be given an annual tax statement at the end of each financial year. Find out more information about how to claim donations on taxes via the Australian Tax Office website. 

It’s important to note that you can only claim a tax deduction for donations from organisations that have a “deductible gift recipients” (DGR) status. 

You’re not able to claim a tax deduction if you’ve made donations via a crowdfunding platform if they’re not a DGR. 

Ensure that you donate to an organisation that’s a registered Deductible Gift Recipient. If you’re unsure, search for the DGR status on the ABN search website. 

This will give you peace of mind knowing that you’re donating to a charity that has deductive gift recipient status.

What donations can you claim on taxes?

When you donate, you get peace of mind that some programs help children in Australia and worldwide who are experiencing abuse, neglect, famine and health issues. 

Your regular monthly donation or a one-off donation can help save a child and give them a future to look forward to.

Overseas Aid Gift Deduction Scheme

The Overseas Aid Gift Deduction Scheme (OAGDS) enables Australian organisations to issue tax-deductible receipts for donations to their overseas aid activities. 

These activities must be to support aid activities in countries that are declared as ‘developing’ by the Minister for Foreign Affairs. Members of the Australian community can then claim their donation as a tax deduction.

OAGDS is one part of the process for obtaining endorsement as a deductible gift recipient (DGR). The DGR process is managed by the Australian Taxation Office (ATO). For more information, visit the Australian Taxation Office website.

The OAGDS Eligibility Criteria contain conditions that organisations need to meet to be declared as an ‘approved organisation’ by the Minister for Foreign Affairs. The OAGDS Eligibility Criteria are available below.

The OAGDS Guidelines assist organisations in understanding the OAGDS Eligibility Criteria and application process and the details and supporting evidence organisations can submit for each OAGDS Eligibility Criteria. The OAGDS Guidelines are available below.

The OAGDS Frequently Asked Questions provide organisations with additional information on the process to be approved under the scheme.

All applications will be assessed under the OAGDS Eligibility Criteria and Guidelines. Please review these documents before commencing an application. The Eligibility Criteria include the following pre-eligibility requirements.

To be eligible to apply for OAGDS, the organisation applying must:

The OAGDS application system is available online. Organisations can provide details and supporting evidence that addresses the OAGDS Eligibility Criteria in the Application Form after registering in the system. 

The Application Form and supporting documentation are used for assessment purposes.

External Conduct Standards

The External Conduct Standards (ECS) are a set of standards that came into effect in July 2019. They are administered by the Australian Charities and Not-for-Profit Commission (ACNC) and govern how a registered charity must manage its activities and resources outside Australia.

The ECS requires charities to take reasonable steps to ensure appropriate standards of behaviour, governance and oversight when undertaking activities or providing funding overseas.

They are intended to promote transparency and provide confidence that resources sent or services provided overseas reach legitimate beneficiaries and are used for legitimate charitable purposes. 

The ECS also seeks to protect vulnerable people overseas. Therefore, all registered charities that operate overseas, including those classified as Basic Religious Charities, must comply with the new ECS.

The ECS covers:

  • How charities control their funds, goods and other resources overseas
  • The need for an annual review of overseas activities and record-keeping
  • Anti-fraud and anti-corruption
  • Measures aimed at protecting vulnerable individuals.

All Australian charities operating overseas on development activities must comply, regardless of the size and scope of the overseas aid activity.

How Donating To Charity Can Reduce Your Tax Bill

1. Deductible Gift Recipient

To be able to claim your donation, your charity must be registered with the Australian Taxation Office (ATO) as a Deductible Gift Recipient (DGR). 

You’ll only be able to claim a tax deduction for gifts or organisations with the DGR status. A DGR is an organisation or fund that can receive tax-deductible gifts. If the organisation is not registered as a DGR, you will not be able to claim your deduction as a donation. 

Claiming your donation doesn’t affect what the charity receives. As long as the organisation is registered as a DGR, it will only affect your tax deductions.

2. Are you sure you can claim it?

Beware if you’ve donated to a crowdfunding campaign. You might be donating to a good cause, but if it’s not registered, you won’t be able to claim your donation as a tax deduction.

If you’re unsure, it pays to check whether your chosen charity is reputable and registered as a DGR on the Australian Charities and Not-for-profits Commission website.

3. When can you claim your donation?

Whenever you make a donation, you’ll need to back up your claim with a tax receipt.  You can claim a tax deduction for a donation under $10 without a receipt. However, to claim deductions for donations over $10, you will need your receipt.

Claiming a tax deduction for a donation must meet four conditions:

  • Your donation must be to a DGR organisation
  • You must have voluntarily transferred money without receiving anything in return
  • The donation must be money or property, which can include financial assets such as shares
  • Your donation must comply with all relevant gift conditions

Tax-Deductible Donations – Frequently Asked Questions

1. What is a tax-deductible donation? How does it work?

Every year, the Australian Tax Office (ATO) provides an incentive for people to donate to charities by making your contributions tax-deductible. 

This means that gifts you make to registered charities with Deductible Gift Recipient status can be claimed as a tax deduction when you submit your tax return at the end of the financial year. So, for example, the full amount of your donation of $2 or more is tax-deductible. 

They will send you an Annual Tax Statement at the end of the financial year so that you have a record of the donations you have made when preparing your tax return

You can find more information about the rules and guidelines for tax-deductible donations by visiting the ATO website.

2. Is it a gift or a donation?

The ATO regards a gift as a donation of money or property that is made without any material benefit to the donor. Therefore, if you’ve received anything in return for your donation, it is deemed a contribution and won’t be tax-deductible.

3. How do I know if my donation is tax-deductible?

Gifts of $2 or more to a non-profit organisation that has Deductible Gift Recipient status with the Australian Tax Office (ATO) are tax-deductible, depending on your own personal tax position. To find out more about the types of donations that are tax-deductible, visit the ATO website.

4. How much of a tax deduction will I receive for my donation?

The tax deduction you receive will depend on your personal circumstances. You can use a tax donation calculator to estimate the potential tax benefit based on your donation amount and income bracket.

5. Who can claim a donation as a tax deduction?

The ATO allows an individual or a business to claim a tax deduction for donations. A donor can be an individual, a company, trust or another type of taxpayer.

6. When is a donation not a tax deduction?

For your donation to be a legal tax deduction, you must not receive anything in return. There are times and events where you might make a donation and receive something from the organisation in return, which will not be counted as a true donation. 

This might be in the form of an auction, the purchase of raffle tickets, purchasing low-cost food items, tickets for attending a fundraising dinner, membership fees, making a payment for a school or a church building, if you have provided a voluntary service and incurred costs, gifts made under a will, or gift vouchers.

7. Are donations tax-deductible for businesses and corporations?

Like individuals, Australian businesses can claim charity donations as a tax deduction for charities that are registered with the Australian Tax Office (ATO) as a Deductible Gift Recipient. Visit the ATO website for more information.

8. Is a regular donation tax-deductible?

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Yes! Ongoing donations that have been made before the end of the financial year need to be recorded. 

Even though your financial contribution may go beyond the end of this financial year, you will still be able to claim these tax-deductible donations when you lodge your tax return the following year.

Regular donations are critical to the success by helping us create, plan and implement effective long term and strategic campaigns against complex issues like climate change and massive corporations and governments. 

9. What can you claim?

Your claimable amount depends on the type of donation. If you donate money, you can only claim $2 or more. Different rules depend on the type of property or shares you’re donating.  

There are special circumstances under the Heritage and Cultural programs where donations can also be tax-deductible.

If you’ve received a pin, token, wristband or sticker for your donation, you’re in luck. You can still claim the deduction. The ATO deems tokens and pins as having no material value and is used by the DGR as marketing and promotional material.

10. When can you lodge your claim?

All tax-deductible donations can be claimed in the year in which they were given. In certain circumstances, you can elect to spread the tax deduction over five income years. It’s best to seek the advice of a tax agent who can help you maximise your tax deductions.

11. How do I claim charity donations on tax returns?

When you donate, you will be given an Annual Tax Statement at the end of the financial year to help you claim a tax deduction when it’s time to prepare your tax return

As long as your donation is $2 or more, you can claim the full amount of money you donated in the section on your tax return that deals with Gifts and Donations. Make sure to keep a copy of the Annual Tax Statement you will be given as proof of your donation.

12. What is a tax-deductible donation receipt?

A tax-deductible donation receipt, sometimes referred to as a donor acknowledgement letter, is provided to you by a charity as proof of your donation for tax-deductibility purposes. 

Some do not issue individual tax-deductible donation receipts. Instead, some will send you an Annual Tax Statement in July that contains a summary of tax-deductible donations you made to us over the previous financial year. 

This will help you claim a tax deduction when it’s time to prepare your tax return.

13. Do you like your politics?

Donations made to a political party from an individual may be claimed as a tax deduction. This includes membership subscriptions to a registered political party. 

Your gift or donation must be more than $2. If this donation is property, it must have been purchased 12 months or more before making the donation. 

The most you can claim in an income year is $1,500 to political parties and $1,500 to independent candidates and members.

There are finer rules and regulations surrounding tax deductions claimed through donations. The Income Tax Professional will advise what and when you can claim and help you maximise your tax return.

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