As Australians step up to support flood-impacted areas through charitable donations, the Australian Taxation Office (ATO) urges caution when claiming these deductions.
In 2019-2020, over 4 million Australians claimed deductions for $3.7 billion to not-for-profits and charities.
“Before rushing to claim a donation in your tax return, it’s important to understand what makes a donation tax-deductible,” explained Tim Loh, ATO Assistant Commissioner. “The donation needs to be made to a deductible gift recipient (DGR).”
Only organisations or funds endorsed as DGRs by the ATO, or in some cases listed by name in the tax law, are entitled to receive tax-deductible gifts or donations. Sometimes DGRs authorise businesses, like a supermarket, to collect donations on their behalf.
Notably, not all charities and not-for-profits are DGRs.
“We know crowdfunding campaigns are growing in popularity, but they may not be run by a DGR, so it is important to check whether your charitable gift or donation will be deductible at tax time. Taxpayers can confirm an organisation’s DGR status by checking the ABN Lookup on business.gov.au,” Mr. Loh said.
Deductions can still be claimed if individuals receive token items of no material value that are used to promote the DGR like stickers or lapel pins. However, expenses like shopping at a Red Cross or Vinnie’s op shop cannot be counted as a tax-deductible gift. In some cases, donations to political parties or independent candidates may be claimed as a deduction.
Importantly, Mr. Loh highlights the importance of maintaining a record of any donations to be able to make deduction claims. The ATO app also includes a myDeductions tool to store photos of receipts throughout the year.
“If you made donations of $2 or more to bucket collections conducted by a DGR for natural disasters, you can only claim a tax deduction of up to $10 for the total of those contributions without a receipt.”
He noted, “Most DGRs will usually issue you with a receipt, but they don’t have to. We will accept third-party receipts as evidence if the receipt identifies the DGR and clearly states that the amount is a donation.”
In the case of misleading or incomplete claims, taxpayers may be asked to amend their tax return or provide evidence to support their claim which can cause delays in finalising the return and issuing refunds.
“So, if you are claiming a donation this tax time, make sure it’s tax deductible, you didn’t receive anything of personal use in return, and you have a record of the donation,” Mr. Loh stated.
Individuals whose tax records are damaged or lost in the floods can also reach out to the ATO to help reconstruct their records.
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