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Contributions to political parties need to be factored into tax returns, says CA ANZ.
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Count on problems with political donations, accountants told
29 April 2022
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10 minute read
Accountants need to keep a wary eye on a client’s political donations as tax time and the federal election coincide, said CA ANZ tax leader Michael Croker.
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ATO guidance defines when contributions to political parties, independent candidates and members can be claimed as income tax deductions.
Mr Croker said there were a range of tax rules surrounding political donations and accountants should refer to the ATO website and s30-242 of the income tax law.
“Some key points of the advice from the ATO [include] making sure political donations must be made in a personal capacity – not from a business – to be tax deductible,” he said.
“The recipient must be a registered political party, an independent MP or an independent candidate.
“The gift must also be $2 or more in money or property purchase during the 12 months before making the donation and the most you can claim in an income year is $1,500 for contributions and gifts.
“If you pay a membership subscription to a registered political party, you can claim it as a tax deduction.”
Mr Croker said accountants who do the personal tax work of MPs and political candidates also had quite a bit of work to do navigating all the rules in preparing their client’s personal tax return.
This included navigating the allowances, reimbursements, donations and gifts, benefits, deductions and recoupments for MPs.
Clarity on political funding
Mr Croker said the tax processes surrounding political party funding were also still unclear.
“There is clearly a lot more work to be done to provide clarity in the tax processes around political contributions,” he said.
“The reality is that the source of political party funding is murky to say the least.
“The Grattan Institute said in February that despite Australia’s political parties collectively reporting $177 million in income, only a tiny fraction of this is identifiable.
“Political parties appear to be masterful in finding ways to raise funds without making disclosure and one suspects the ATO may also encounter difficulty in establishing whether the income tax deduction rules for donations are being side-stepped.”
Mr Croker said the Australian Electoral Commission had detailed donation disclosure rules, which were tightened in legislation enacted in December 2021.
“But the AEC has a disclosure threshold amount for its public reporting – the current threshold that applies from 1 July 2021 to 30 June 2022 is more than $14,500,” he said.
This would enable large donors to split their donations into several below-threshold payments to avoid scrutiny.
It was also impossible for the public to distinguish between money raised at fundraising events and income associated with party investments or services.
Mr Croker said there were plenty of rulings and guidance to be found in relation to political contributions, but the reality was that Australians were only seeing a very small part of the political donation picture.
“The two major parties declared income of more than $150 million to the AEC in 2020-21, the Grattan Institute reported,” he said.
“But the data publicly released only showed declared donations making up 9 per cent of this total.
“The rest is undeclared income or falls into what the Grattan Institute calls a messy bucket called ‘other receipts’."
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