When is a donation deductible?

A tax deduction is only available for donations of $2 or more that are:

• made to a deductible gift recipient (DGR)
• made without receipt of material benefit or advantage (eg buying a raffle ticket or items at a charity auction)
• evidenced by a record of donation.
  

Additional conditions apply for donations (including membership fees) to political parties, independent candidates and members of political parties.

Am I donating to a DGR?

The DGR status of an entity can be searched on the ABN Lookup. Some entities are only a DGR in relation to a particular fund, authority or institution that it operates. For example, many schools are only endorsed as a DGR in relation to a building fund, such that general contributions made to the school would not be tax deductible.

No tax deduction is available for donations made to social media or crowdfunding platforms unless the platform is a registered DGR. This means that donations to personal fundraisers, such as raising money for an individual’s medical bills, are not tax deductible.

What about that DGR I donated to through a GoFundMe or Facebook campaign?

In Australia, a tax deduction is available for donations to DGR fundraisers on GoFundMe and Facebook as both platforms have partnered with PayPal Giving Fund. Donations to a Facebook or GoFundMe fundraiser eligible for a tax deduction actually go to the PayPal Giving Fund, a DGR listed public ancillary fund that makes grants towards the donor’s recommended charity.

Donations to political parties

Donations to registered political parties or independent candidates are only tax deductible when made by an individual in a personal capacity, that is, outside of the course of carrying on business. The maximum deduction that can be claimed in an income year is $1,500 for donations to political parties and $1,500 for donations to independent candidates or members.

Businesses cannot claim deductions for donations to political parties and candidates.

Workplace giving programs

Employers may facilitate donations to DGRs for their employees through workplace giving programs or salary sacrifice arrangements.

Under a workplace giving program, an employer forwards a portion of an employee’s salary to a nominated DGR. The employee claims a deduction for the donations in their tax return and may be eligible to have PAYG withheld at a lower rate.

Under a salary sacrifice arrangement, an employee agrees to have a portion of their salary donated to a DGR in return for the employer providing them with benefits of a similar value. In this case, the employer makes the donation and claims the relevant deduction.

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What records do I need to keep?

Taxpayers should keep records for all tax deductible donations made. DGRs will typically issue a receipt for donations made, however, there is no requirement for a DGR to provide a receipt. Donations made through a workplace giving program can be evidenced by an employee’s income statement or payment summary, or by written records from the employer.

Should I donate to a cause if no tax deduction is available?

Many charities that are registered with the Australian Charities and Not-for-profits Commission do not have DGR status. This does not indicate that a charity is illegitimate or that its work is not valuable — DGR endorsement is simply a tax concession that some charities are entitled to. The ACNC website provides further information on donating to legitimate charities and finding out how a charity uses donations.

Accountants should be mindful of tax considerations that can arise where a business donates to an organisation that is not a DGR. A business that supports a charity through advertising or sponsorship may be entitled to a tax deduction as a business expense. Donations made by a business on behalf of an employee may be subject to fringe benefits tax. GST treatment for contributions made to crowdfunding campaigns also vary depending on the crowdfunding model.