Guide to tax deductible donations in Australia
If you didn’t already know, donating to charity are tax deductible donations. This means eligible donations you have made or are considering making, to any approved organization, can reduce the amount of tax you owe to the government. This is another great benefit of donating to charity, and the tax deductions available are the government’s way of both encouraging and rewarding the public for donating. If you are unsure as to whom you can donate to or what you can donate, read on.
What can you donate?
Tax deductible donations can include more than just money, below are the types of donations you can make which are eligible for a tax rebate
Money amounts over $2 that are donated can be claimed as tax deductible donations, there is no limit on the amount you can claim however you cannot add to or create a tax loss by using the amount claimed for a donation.
For example if your taxable for this financial year is $15,000 and you made a donation of $20,000, you can only claim the $15,000, the other $5,000 cannot be claimed. There is a way around this, as you can spread out the tax benefit for up to 5 years, thus claiming $15,000 of the $20,000 this year, and leaving the other $5,000 to claim the next year. To do this, you have to lodge a separate application with the ATO.
Property donations can be claimed as tax deductible donations, under two different categories. The first is any property purchased in the last 12 months before making the donation. The property has to have been obtained through a purchase by money or some other valuable consideration. It cannot be a prize you have won, or a gift you have been given or an inheritance. The mount you can claim is either the market value of the property on the day it was donated, or the amount you paid to purchase the property, whichever is the lesser amount of the two.
If the property has not been purchased in the last 12 months then you can still claim tax benefits for donating the property, the property has to be valued by the ATO at over $5,000. To do this you will have to make an application to request such a valuation by to ATO.
Donation of trading stock
Donations of trading stock can also be claimed as tax deductible donations. Trading stock being any stock that has been produced, manufactured or acquired that is held for the purpose of manufacture, sale or exchange in the ordinary course of business. The amount that can be claimed is the market value of the stock at the time of the donation. An example of this type of donation could be a person who owns an electrical store donating a fridge to a charity that needs one. The amount the owner could claim would be the market value of the fridge on the day it was donated.
Donation of shares
Shares valued at less than $5,000 in a publicly listed company can be donated and claimed as tax deductible donations. The value amount is the market value of the shares on the day you donated them. The shares have to have been acquired 12 months or more before donating. If you were to donate $10,00 worth of shares but they were in 2 different companies at $5,000 each, then you can still claim the whole $10,000 benefit, as the donations can be listed as separate $5,000 donations. If the gift includes some shares purchased over 12 months ago and some purchased in the last 12 months, then the shares purchased under 12 months ago will be valued at either the market value at the time of donation or the amount you paid for these shares, which ever is the lesser amount. Unlike the requirements property donations, shares that have been won, gifted to you, inherited or received as a bonus can be donated and claimed as a tax deduction.
Donation of cultural gifts
Donations of gifts that are of cultural significance can be claimed as tax deductible donations. The value will have to be determined by a professional approved valuer, and the donation will be assessed as to whether it is eligible. The donation can only be made to the Australiana fund, any Australian public library, public art gallery, or public museum, or the Australian government for Artbank.
Donation of Heritage gifts
‘Gifts’ here are places that are include in the National Heritage List, the Commonwealth Heritage List, or the Register of the National Estate. Heritage gifts can only be donated to either the Australian Council of National Trusts, or the National Trusts of each state or territory.
Who can I donate to?
Tax deductible donations can only be claimed when they are made to approved organisations. This means the organization has to be endorsed as a deductible gift recipient (DGR) by the ATO or the DGR is listed by name in the relevant tax law. You can find out if an organization is a DGR by visiting the Australian Business Register website.
It is important to remember to keep any documents pertaining to your tax deductible donations, this includes receipts if you are given them, or any records such as bank statements to help prove your donation if you were to be asked to do so. In the case of property donations you will need to have records of when you acquired the property, the amount you paid or any valuations.
Overall tax deductible donations are a great way to both reduce your tax bill while also helping out those in need, hopefully this guide has helped to make that process a little bit easier.