Are your donation claims tax-deductible?

The ATO have advised to check your paperwork before claiming deductible contributions.

Accountants and taxpayers have been advised by the ATO that they must ensure that charitable donations meet the correct criteria if they need to claim a tax deduction.

After the recent floods and other natural disasters, they are aware that Australian’s are very charitable, so they are expecting to see a lot of donations and deductions in tax returns this year.

Guidance from the ATO is that, before you rush to claim a donation in this year’s tax return, it is vital to recognise what makes a donation tax deductible. Your donation must be made to a deductible gift recipient (DGR).

Not all charities and not-for-profits are DGRs, only organisations or funds recognised as DGRs are permitted to receive tax-deductible gifts or donations.

The ATO decides which organisations are accepted as DGRs, or in some cases recorded by name in the tax law. Most crowdfunding campaigns which raise money for charitable causes are not run by DGRs.

Crowdfunding campaigns have become popular recently, but they are not always run by a DGR, therefore it’s important to verify if your charitable donation or gift will be deductible at tax time. If you would like to check if an organisation is recognised as a DGR, you can find this information via the ABN Lookup on business.gov.au.

In return for your donation, you may only accept items which would be deemed as promotional advertising for the DGR such as badges, pens, or wristbands.

If you receive an item in return for your donation, such as making a gold coin donation for a sausage sizzle or buying second-hand goods from an Op Shop, this is not deemed a tax-deductible gift.

It is important to keep a record of your donation because while most DGRs would issue receipts, they are not required to. The ATO allows third-party receipts as evidence only if the receipt identifies the DGR and clearly states that the amount is a donation, and small amounts were eligible without a receipt up to a total of $10.

If you have donated $2 or more to bucket collections organised by a DGR for natural disasters, you may only claim a tax deduction up to $10 for the total sum of those donations without a receipt.

The ATO want to make it simpler for you to support the charity of your choice. You can use the myDeductions tool in the ATO app to store photos of donation receipts throughout the year. Then you simply send them through to your registered tax agent. The ATO may ask a taxpayer to present evidence to support their claim or revise their tax return to remove the claim.

A large number of tax returns submitted by individuals in the previous financial year needed to be adjusted by the ATO for charitable claims because the taxpayer incorrectly claimed the donation. So, if you are claiming a donation this tax time, make sure it’s tax deductible, you didn’t receive anything of personal use in return, and you have a record of the donation. If you are unsure, it is best to seek the advice of an accountant.

For the individuals who have had their tax records damaged or lost in the recent floods, the ATO are able to assist you to recreate them so you can be prepared this tax time.

Detailed information about donations to assist disaster victims is located on the ATO website: https://www.ato.gov.au/general/support-in-difficult-times/natural-disaster-support/recovery-following-natural-disasters/donations-and-fundraising-to-help-disaster-victims/

General information about claiming tax deductions for donations is also available on the ATO website: https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Other-deductions/Gifts-and-donations/

Should you have any queries about contributions which you have made to charitable organisations this financial year, please do not hesitate to contact that tax champions on: (03) 8393 1000.