Pitfalls of making charity donations

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In this sponsored post, chartered accountant GAIL FREEMAN explains how to make tax deductible payments to charities before June 30. 

Christie plans to make payments to charities she supports before June 30, but wants to be sure the donations are tax deductible.

I told her that the main criteria for receiving a tax deduction was that the amount must be made to a Deductible Gift Recipient (DGR), it must be $2 or more and it must be a gift.

Gail Freeman.

“If you make a gift to a crowd-funding platform that platform must be registered as a DGR,” I said.

“By way of example, you make a payment of $50 through GoFundMe which is a crowdfunding platform.

“You need to check whether GoFundMe is listed as a DGR in Australia. You do this by going online to the Australian Business Register at abr.business.gov.au/ type in GoFundMe and check its DGR status.

“The site indicates that it is not registered as a DGR so you cannot claim a payment made to GoFundMe as a donation.

“This contrasts with PayPal, which shows the Paypal Giving Fund is registered as a DGR so the donation made through PayPal is tax deductible.”

I told her that one of the other potential areas for confusion was overseas donations.

“I often see clients who have made substantial donations to an overseas charity and have not checked that the organisation is registered as a DGR and then discover, sadly, that the donation cannot be claimed,” I said.

“It’s always a good idea if you are making a donation to an overseas charity to check that it is registered as a DGR in Australia. I recently saw a client who had made a donation to a recognised charity in the UK on the death of a family member, but the gift was not deductible in Australia and the client was very surprised as the charity is known here.”

Christie said: “I hadn’t realised the issue with overseas donations. I was thinking of sending some funds overseas, so now I will look carefully at whether it is going to be tax deductible.”

I told her that I’d noticed this year that a lot of people had made donations as gifts in the name of the donee and given the donee a receipt for that donation.

“It is important that only the person whose name is on the receipt makes the claim,” I said.

“Again, I have seen clients with very low income making substantial donations in their name and expecting that their higher-income partner can claim the donation. This is not correct.

“Lastly, buying gifts or raffle tickets from a charity is not a donation. The reason for this being that you receive a benefit for your money.

“And because it is so close to the end of the financial year, I need to remind you that any deductible superannuation contributions you wish to make this year must be made before June 30.

“Most public funds will have an earlier cut-off date, often as early as June 20, so you need to take action on this now. If you make the payment directly to your SMSF, then June 30 will apply.”

If you have any questions about donations or any other type of tax deduction, ask the friendly team at Gail Freeman & Co on 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au


This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser.

Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.

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