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Donations: what’s tax deductible, what’s not

A client rang accountant GAIL FREEMAN wanting help with her making large tax-deductible donations before the end of the financial year, including one to a candidate in the federal election. 

WHEN Medina called wanting help with making tax-deductible donations, I told her last year the Australian Taxation Office (ATO) was questioning large donations. 

“So your return could well be checked this year,” I said.

Gail Freeman.

“First of all you need to be certain your donations are tax deductible. To be tax deductible, donations must be made to a deductible gift recipient (DGR), be $2 or over and you must have receipts or other proof of payment. 

“I often see receipts for tea towels or raffle tickets, these are not donations. You cannot receive anything in return when you make a donation.”

To check if an organisation is registered to receive tax-deductible donations, search ABN Lookup (abr.business.gov.au). It’s important to ensure using the name shown on this website as some large organisations have some divisions with DGR status and some without. “One little trap,” I told Medina, “if you make a donation to a person in difficult circumstances it is not a tax-deductible donation unless you make it on GoFundMe or Facebook. Those donations go to the PayPal Giving Fund and you should be able to claim a tax deduction provided they are Australia based.”

Medina was surprised to discover GoFundMe donations were tax deductible.

“You also asked about donations to your preferred candidate,” I said.

“If you make a donation to either a registered political party or an independent candidate you can claim a tax deduction for up to $1500 each. 

“There is also a program whereby you can make tax-deductible cultural gifts to public art galleries, museums and libraries in Australia. This is known as the cultural gifts program. It is quite complex, so if you are interested and have some appropriate artworks we can discuss this at your next appointment.”

Anyone making a regular donation to a DGR by direct debit, will not  generally get a receipt for each donation, but at the end of the year will receive a summary of all donations made that year. This is all the ATO needs to confirm the claimed donations.

“One other little thing that probably won’t affect you, Medina,” I said,”if  your taxable income results in a loss you can’t claim the donations. 

“By way of example, if your taxable income is $40,000 and you make a $50,000 donation, you can only claim $40,000 of your donation as a tax deduction.”

Medina said she’d be sure to send all the receipts when sending in her tax return.

If you need advice on donations or any other tax-related matter, contact the friendly team at Gail Freeman & Co Pty Ltd on 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer
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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