Save
How can I give tax effectively?
With Christmas just behind us, there’s a noticeable increase in clients’ families requesting that charitable giving considerations be incorporated into their overall financial strategy. But how can you do it effectively?
How can I give tax effectively?
With Christmas just behind us, there’s a noticeable increase in clients’ families requesting that charitable giving considerations be incorporated into their overall financial strategy. But how can you do it effectively?
There are many ways to undertake philanthropy, some better than others. Although many succumb to donating on an ad hoc basis in response to persuasive advertising by charities, engaging in a structured, regular giving program to well-considered causes is a better approach. This provides control and order to your philanthropic actions, and it can also have a greater social impact.
It’s important to be aware that while the ATO provides a tax deduction to those who donate to worthwhile causes, not all gifts will be tax deductible.
The tax system allows for deductions when made to deductible gift recipients (DGRs). Fortunately, most established Australian causes are registered but some local community, religious or purely international causes will not be registered. If you are unsure, it is easy enough to ask. If in doubt, the ABN Lookup website is a good guide as is the Australian Charities and Not-for-profits Commission (ACNC) website.
The second tax issue is to make sure the person making the donation is a taxpayer. For example, if your spouse is paying tax and you are not, the donation should be made by your spouse. If you are making a large one-off donation or making a donation in a year and your taxable income is not very high, you should be aware that it is possible to spread your donation over five years in varying annual amounts. This concession will enable you to ensure that your gift is deductible at your highest marginal tax rate.
The easiest way to obtain a tax deduction is to make a cash donation, so long as it is made to a DGR and is over $2. The exception to this is cash gifts under a will which are not deductible.
Donating property other than listed shares worth less than $5,000 has to satisfy certain alternative requirements such as acquired within 12 months or valued at over $5,000. We suggest you check with the charity involved or with your tax adviser now if you are looking to make such a gift before the end of the tax year. It is also important to remember that the sale of shares or other donated property is a CGT event and you may trigger a capital gain and have to pay tax, even though the funds have been donated.
For those with larger philanthropic intentions, of $500,000 or more, it is worth considering establishing a private ancillary fund or foundation. This provides an immediate tax deduction and has the benefit of establishing a giving program that can last for many years.
Anyone can establish a foundation by following the registration process with the ACNC and the ATO. A trigger to establish a private ancillary fund can be incurring a large capital gain. For example, if an investor had a capital gain of $1 million, taking into account the capital gains tax discount of 50 per cent and a tax-deductible donation of $500,000, it would mean no tax would be payable on the capital gain.
Tony Fittler, managing partner, HLB Mann Judd Sydney
Tax saving
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time. ...Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. ...Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. ...Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. ...Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. ...Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. ...Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. ...Read more
Tax saving
10 ways to reduce your tax bill
With the tax return deadline only one month away, these tips could help minimise your tax bill. ...Read more
Wrapping up an eventful 2021
Listen now
What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now
Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now
Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now
Tax saving
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time. ...Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. ...Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. ...Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. ...Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. ...Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. ...Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. ...Read more
Tax saving
10 ways to reduce your tax bill
With the tax return deadline only one month away, these tips could help minimise your tax bill. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
