Often when you donate money to a charity, your donation can be tax deductable. Tax deductible donations are a fantastic way to give your tax refund a boost while contributing to a worthy cause that is close to your heart.
This is the definition of a win-win situation. It is important to remember that every time you donate over $2 to a registered charity, it is likely that this charitable donation you have made is probably tax deductible.
Here is some important information to be aware of which will assist you with correctly claiming your tax-deductible donations on your tax return.
Charitable Donations and Tax Deductions
If a charity is registered by the Australian Tax Office 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 to check its eligibility.
In most cases, deductible gift recipient charities mention on their website if donations are tax deductible. If you are still not sure, it would be a good idea to ring the charity and ask for proof of their deductible gift recipient status.
Examples of When A Donation Is Not A Tax Deduction
When you receive a raffle ticket, event entry, dinner attendance, chocolates, or anything similar to this, then your donation can’t be claimed as a deduction. This is due to the fact that if you receive something because of your donation, then don’t claim the donation as a tax deduction.
Furthermore, if the donation was to an organisation that was not a registered deductible gift recipient, then you can’t claim it, either.
Donations to Churches
Some Australians automatically assume that gifts made to a church are always defined as tax deductable donations. This is unfortunately not the case, and in some instances the Australian Tax Office has previously demanded repayments from people who claimed ineligible deductions.
Gifts of money made to a church such as gifts to a church’s building fund can only be claimed if the church is a registered deductible gift recipient.
When trying to determine if a charity or church is a Registered Deductible Gift Recipient (DGR), firstly most charities will tell you and if they don’t it would be advised that you ask them if they are.
If you are still unsure you can go to the official ABN lookup website. On this site you can enter the name of the charity in the search bar, click enter or search. Next you will see a list and once you find the name of the charity you are researching you can click on its name. Once you click on the charities name you should scroll down until you see a sub-heading called “Deductible gift recipient status” and you will than find out if they have answered with either yes or no.
Tips for keeping track of your tax-deductible donations to charities
There are many cases where Australians have lost potential savings during tax time simply because they have forgotten about some deductible donations or have lost receipts.
It is important to save the receipt of every donation you make. It would also be a great idea to set up a draft email in your email account called “charity donations”. You will never send this email you will simply have it stored as a draft. Having it saved in your draft email section will make it easy to find. Every time you donate just open up the draft and add a note which includes the following three things; the name of the charity, the date and the amount of money you have donated.
Keep a simple list of the names of each charity you donate to. Then, each year at tax time, send each of them an email asking for a summary of your donations in the past 12 months.
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 will remember at tax time.
Other important information to remember about tax deductions
When you receive something from your donation such as a raffle ticket, pen or bandana you are unable to claim this donation on your tax return. This is because the ATO views this as a transaction where you are receiving a good or service in exchange for the money you have donated.
Some charities also have specific rules that limit the donation amount you can claim. This should be explained to you or referenced on your receipt. That way you should be informed of how much of your donation is actually a tax-deductible donation.