Around 4.2 million Australians claimed charitable donations in the 2018-19 financial year, however two in three got it wrong, the Australian Tax Office (ATO) has revealed.
“Australians are a generous bunch, but not all gifts and donations are tax deductible,” ATO assistant commissioner Tim Loh said.
“There are four main reasons your donation or gift may not be tax deductible. The first is giving to an organisation that is not endorsed by the ATO as a deductible gift recipient (DGR).”
Just because an organisation is a charity doesn’t mean it’s automatically a DGR. Additionally, giving to crowdfunding campaigns doesn’t automatically qualify as a deductible charitable donation either.
“The growth in online crowdfunding is proving that Australians are looking to be charitable online. Unfortunately, unless your donation or gift is made to an endorsed DGR it will not be tax deductible,” Loh said.
“We also see people donating directly to foreign charities and not-for-profits. Unless the organisation is a registered Australian DGR, then those donations are not tax deductible.”
He said Australians who aren’t sure should check an organisation’s DGR status by double checking the ABN Lookup on business.gov.au.
Another reason your charitable giving may not meet the cut is if you received something in exchange.
For example, if you bought a chocolate with the funds to go towards a charitable cause, or you purchased a raffle ticket, that’s not a tax-deductible gift.
“Thirdly, taxpayers must keep good records. Most organisations will usually issue you with a receipt, but they don't have to. We will accept third-party receipts as evidence of a gift to a DGR if the receipt identifies the DGR and states the fact that the amount is a donation to the DGR,” Loh said.
“However, if you made one or more donations of $2 or more to bucket collections conducted by an approved organisation for natural disasters, you can claim a tax deduction of up to $10 for the total of those contributions without a receipt.”
Loh suggested charitable Aussies use the ATO app’s myDeductions tool to store photos of receipts throughout the year, so it’s easier to show your records at tax time.
The fourth reason you may be pinged for your charitable donation is if it hasn’t occurred yet, or has already been claimed.
That means that you can’t claim a deduction for a charitable donation you plan to make in your will.
“While including a donation in your will is a great legacy to leave, testamentary gifts are generally not tax deductible,” Loh said.
It also means you can’t claim for workplace giving that has already been registered in the amount of tax paid in each pay period. That’s because workplace giving is reported by your employers to the ATO.
If taxpayers get it wrong, the ATO will ask for proof of the giving, or for them to change their claim.
But if the ATO suspects it was a deliberate attempt to defraud the tax office, it will take action and penalties may be applied.
“So, this tax time make sure you have a record of the donation you are claiming.”