Gifting Shares To Charity In Your Will

When preparing a Will, people often contemplate gifting money to charity, but have you ever thought about gifting shares after you pass away?

Although many businesses and organisations encourage the gifting of shares, it is worth contacting them to see if they accept shares directly or, as is more likely the case, the shares need to be gifted to a specific “share gifting charity” which sells the shares and distributes the money to other charities.

Interestingly, you can potentially donate either dividend income or shares to charity, both while alive or from your estate, notwithstanding that the taxation outcomes may vary significantly depending on your choice.

Donating shares

You can donate shares while alive or from your estate depending on your preferences. The tax consequences may be different and Centrelink may need to be advised if the gift occurs during your lifetime.

Donating shares traditionally involves the completion of a Share Sale Donation Form which authorises the “gift company “ to facilitate the sale of shares.  If you are looking for a tax deduction in a particular year, it is important that you seek professional advice as to whether your donation satisfies the relevant criteria to be tax deductible. It is also important to contact the organisation you are gifting the shares to as the time taken to process the transfer may vary depending on the shares involved and whether they are issuer sponsored or chess sponsored.

The types of issues that may impact the donation includes;

• The shares may need to be held in a company actively trading on the Australian Stock Exchange
• There may be a minimum value threshold needed before the shares can be transferred
• The shares may need to be actively trading and not relate to delisted or suspended companies
• They may not be able to currently be owned in a Self-Managed Super Funds (SMSF). Self-managed Super Funds (SMSFs) are unable to make donations to any charity as their sole purpose is to provide superannuation benefits to their members.

Depending on the value of the gift, you may actually be able to recommend an Australian charity where the share sale donation is to be sent.

Share sale donations over $2.00 (in addition to some other requirements) may be tax deductible for Australian shareholders if the charity meets the Australian Taxation Office’s eligibility criteria of DGR (deductible gift recipient).

Donating dividends

Dividend donations over AU$2.00 (in addition to some other requirements) may be tax-deductible if the “gift organisation” is a registered gift recipient. As above, depending on the value of the gifted dividend you may be able to recommend an Australian charity where the donation is to be sent.

What if the shares are held in a deceased estate?

The share sale donation form must be completed and signed by the Executor(s) of the estate.  If it is a joint holding, the surviving holder must also sign the form.  In addition to receiving the form, the gift organisation may need to sight copies of either probate or the death certificate, the Will and possibly a small estates indemnity (if applicable).

One advantage of gifting shares is that donors may not have to pay brokerage for the sale of their shares nor set up a trading account. They may still be liable for any capital gains tax arising from the sale, depending on their own individual circumstances.

Inherited shares

If you acquire shares as part of a deceased estate, you have certain tax obligations and entitlements in relation to these shares. If you inherit shares:

• you treat inherited shares in the same way as any other capital gains tax assets
• where the deceased acquired the shares before 20 September 1985, you must use the market value on the day the person died, not the market value on the day you received the shares
• you must keep records, so you do not pay more tax than you need to.

Tax considerations

There may be many reasons why gifting shares for charitable purposes may appeal to someone… and it’s not usually anything to do with tax! However, when a person dies with carry forward capital losses, then those losses are lost and cannot be used by the estate. Selling shares prior to death can be a very tax effective option when it comes to utilising these losses. Though, if capital losses exist at the date of death then those losses will not be available to your estate to reduce any capital gains.

Steve Wildes, Partner, Paris Financial