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Support a charity? Here are 4 reasons the taxman wants you to check your donations

  • July 15 2021
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Support a charity? Here are 4 reasons the taxman wants you to check your donations

By Cameron Micallef
July 15 2021

Australians are known for being a generous bunch, but not all forms of generosity are a tax deduction, with the ATO revealing the four most common mistakes taxpayers are making when they try to claim donations.  

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Support a charity? Here are 4 reasons the taxman wants you to check your donations

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  • July 15 2021
  • Share

Australians are known for being a generous bunch, but not all forms of generosity are a tax deduction, with the ATO revealing the four most common mistakes taxpayers are making when they try to claim donations.  

check your donations

The Australian Taxation Office (ATO) has warned taxpayers of the four mistakes they are likely to make this year. 

As you might have heard, charitable donations and other gifts can be tax-deductible. This is true, but not all donations count, according to the taxman.

Of course, there are many reasons why you might want to donate to a particular charity or cause regardless of the tax deduction, but every $2 donated under the right set of circumstances counts against your taxable income.

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With the median wage in Australia being $55,829, the median taxpayer is taxed at 32.5 per cent, meaning a $1,000 donation would save them $325 on their tax return.

The Tax Office shows 4.2 million Australians took advantage of this tax strategy, claiming deductions for more than $3.9 billion in gifts and donations to charities and not-for-profits in 2018-19.

However, while generous Aussies continue to support charities, nearly two in three donations claimed were adjusted because the taxpayer could not prove they made the donation.

As such, ATO Assistant Commissioner Tim Loh has given taxpayers claiming a donation four handy hints this tax time:

According to the assistant commissioner, the most common mistake Aussies are making is who they are donating money to.

“The first is giving to an organisation that is not endorsed by the ATO as a deductible gift recipient (DGR),” Mr Loh said.

A DGR is an organisation or fund that is endorsed by the ATO to receive tax-deductible gifts or donations. Not all charities and not-for-profits are DGRs.

This includes donations to many crowdfunding campaigns that raise money for worthy causes, but according to the Tax Office, taxpayers might not be allowed to donate to these cases due to them not being ran by DGRs.

“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,” Mr Loh explained.

The Tax Office also highlighted the DGRs must be Australian charities, with many Aussies donating directly to foreign charities and not-for-profits, meaning those donations are not tax-deductible.

The second reason your donation may not be tax deductible is where you receive or expect to receive a monetary or personal benefit or advantage in return.

“We know Australians love raffles, and fundraising chocolate. Sadly, if you buy chocolate, a raffle ticket or an item from an Op Shop, this isn’t considered a tax-deductible gift,” Mr Loh explained.

While Australians are a generous bunch, they appear to be poor at keeping records, with Mr Loh warning taxpayers that they must be able to prove the donation.

“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, he 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.”

Finally, some people incorrectly claim tax deductions for donations they intend to make in their will or claim for workplace giving that has already reduced the amount of tax paid in each pay period.

“While including a donation in your will is a great legacy to leave, testamentary gifts are generally not tax-deductible,” Mr Loh concluded.

Support a charity? Here are 4 reasons the taxman wants you to check your donations
check your donations
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

author image
Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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