We all want to donate when we can, but is everything claimable as a business tax deduction? Guess what, not all donations are! Let’s dive in and get into the nitty-gritty so you know what you can and can’t claim when you’re supporting your favourite causes.
What is a deductible donation?
Many of us have a charity or cause that is close to our heart – I know I do. It’s an excellent way to give back when you can and also get a bit of tax reduction on your return – win-win!
To meet the requirements of a deductible donation, it must meet these rules:
- The donation is money, property or financial assets (like shares)
- Be a gift in all senses – you as a donor can’t receive anything in return
- Made to a deductible gift recipient (DGR) – which is a charity or similar who’ve gone next level and have this status making your donations, you guessed it, tax deductible!
There is no flexibility around any of this. As with all expenses, you still need a document to support your expense. Please make sure you get a tax-deductible receipt with their ABN noted on the receipt.
What donations are not tax-deductible?
There are loads of amazing charities and institutions out there that do really great stuff and while you can still donate to them, if they don’t have the DGR status we just looked at, these ones simply aren’t tax deductible. Just because they’re asking for/receiving donations, doesn’t mean you can claim it as a tax deduction.
You cannot claim a tax deduction when you receive something in return. For example, entry into a raffle or major prize competition, tickets to an event, auction prizes, chocolates etc. So many people get this wrong!
If you receive a material benefit for your donation it’s considered a contribution rather than a donation. As a business, it *could* be considered an expense (which can still positively impact your position at tax time) under advertising for example. Make sure you get a tax invoice from the charity and check in with your BAS or Tax Agent! Because there are more than you think that can’t be claimed.
I see this commonly with Go Fund Me pages. Because the money is going directly to an individual rather than a DGR.
Just to clarify – if these are something close to your heart and you still want to donate, that is no issue (I myself have a couple non DGR I donate to), I’m just clearing up not all ‘donations’ are tax deductible.
Are there any limits on claiming?
To claim a donation, it must be a donation of $2 or more, I’m sure you knew that one.
You can’t donate to the point of tax loss. For example, donating more than your profit.
If you would like to make a sizeable donation that could create a tax loss, you can absolutely spread it over a few years – always get advice from your Tax Agent for the best way forward here!
If you need further clarification on charitable tax deductions, I’m always happy to point you in the right direction! Make sure you check out the ATO Guidelines too.