The ATO said accountants and taxpayers need to make sure that charitable donations meet the right criteria if they want to claim a tax deduction.
“We know Aussies are very charitable and after the recent floods, we are expecting to see a lot of donations and deductions in tax returns this year,” assistant commissioner Tim Loh said.
“Before rushing to claim a donation in your tax return, it’s important to understand what makes a donation tax deductible. The donation needs to be made to a deductible gift recipient (DGR).”
Organisations or funds endorsed as DGRs are entitled to receive tax-deductible gifts or donations, but not all charities and not-for-profits are DGRs.
DGRs are either endorsed by the ATO, or in exceptional cases listed by name in the tax law. Many crowdfunding campaigns that raise money for charitable causes are not run by DGRs.
“We know crowdfunding campaigns are growing in popularity, but they may not be run by a DGR, so it is important to check whether your charitable gift or donation will be deductible at tax time. Taxpayers can confirm an organisation’s DGR status by checking the ABN Lookup on business.gov.au,” Mr Loh said.
“Further, in return for your donation, you can only accept items that would be considered promotional advertising for the DGR such as pens, wristbands or badges.
“If you receive something in return for your donation, for example you make a gold coin donation for a sausage sizzle or buy vintage goods from an Op Shop, this isn’t considered a tax-deductible gift.”
In the 2019-20, around 4.2 million Australians claimed deductions for $3.7 billion in gifts and donations to charities and not-for-profits.
Mr Loh said it was vital to keep a record of donation because while most DGRs would issue receipts, they did not have to.
The ATO would accept third-party receipts as evidence if the receipt identifies the DGR and clearly states that the amount is a donation, he said, and small amounts qualified without a receipt up to a total of $10.
“If you made donations of $2 or more to bucket collections conducted by a DGR for natural disasters, you can only claim a tax deduction of up to $10 for the total of those contributions without a receipt,” Mr Loh said.
“We want to make it easier for you to support the charity of your choice. The myDeductions tool in the ATO app can store photos of donation receipts throughout the year. Then simply upload your donation information to myTax or send them through to your registered tax agent.”
He said the ATO might ask a taxpayer to provide evidence to support their claim, or amend their tax return to remove the claim.
“Last year, we had to adjust a large number of charitable claims because the taxpayer incorrectly claimed the donation,” he said. “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.
“For those that have had their tax records lost or damaged in the floods, we are here to help you reconstruct them so you can be prepared this tax time.”
Specific information about donations to help disaster victims is available 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: https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Other-deductions/Gifts-and-donations/
Philip King is editor of Accountants Daily and SMSF Adviser, the leading sources of news, insight, and educational content for professionals in the accounting and SMSF sectors.
Philip joined the titles in March 2022 and brings extensive experience from a variety of roles at The Australian national broadsheet daily, most recently as motoring editor. His background also takes in spells on diverse consumer and trade magazines.