How to claim tax deductible donations

When you give money to a charity, your gift is often a tax deductible donation

Like many Australians, you might have a charity or cause that’s close to your heart. Tax deductible donations are a great way to give your tax refund a boost, while contributing to a worthy cause you care about. It really is the definition of a win-win! Charities rely on the generosity of people who donate money to support them. Without the generosity of people like you, they wouldn’t be able to do the great things they do to help good causes.

Every time you make a donation more than $2 to a registered charity, don’t forget, your charitable donation is probably tax deductible. 

You can reduce your income tax with donations but what makes donations tax deductible?

Let’s answer the No.1 question we get asked about tax and charity donations:

Is my donation tax deductible?

If a charity is registered by the ATO as a “Deductible Gift Recipient organisation”, donations you make to that charity may be tax deductible.

You can find out if a charity is a deductible gift recipient organisation by searching the Australian Business Register (more on that below – it is easy to check).

Deductible gift recipient charities usually tell you on their website if donations are tax deductible. If you’re still not sure, ring the charity and ask for proof of their deductible gift recipient status.

When is a donation not a tax deduction?

First of all, if you receive a raffle ticket, dinner attendance, event entry, chocolates, or anything like that, then your donation can’t be claimed as a deduction. Basically, if you receive something because of your donation, then don’t claim the donation as a tax deduction.

Also, if the donation was to an organisation that is not a registered deductible gift recipient, then you can’t claim it unfortunately.

Donations to churches

Some people assume that gifts to a church are always tax deductible donations. Unfortunately, that’s not right, and the ATO sometimes demands repayment from people who claimed ineligible deductions.

Gifts of money to a church (including gifts to a church’s building fund) can ONLY be claimed IF the church is a registered deductible gift recipient. Read below to learn how to check if your church is eligible…

How to check if a charity or church is a Registered Deductible Gift Recipient (DGR)

This is easy.

Most charities will simply tell you. If they don’t tell you, just ask. If they say “no”, or they are not sure, then your donation probably isn’t tax deductible. Don’t claim it unless you know for sure that it’s eligible, because the ATO is pretty good at finding ineligible tax deductions.

You can look up the DGR status of any organisation:

1. Go to the official ABN lookup site
2. Enter the name of the charity you want to look up then hit ‘enter’ or ‘search’
3. Next you’ll see a list. Find the right charity/organisation and click the ABN number link on the left
4. Next you’ll see a details page – down toward the bottom you’ll find a sub-heading called “Deductible gift recipient status”. What does it say there?

Let’s look at two examples:

The Smith Family is an Australian charity helping underprivileged children get a better education. If we go to the ABN lookup and enter “Smith Family”, we easily find their profile. Under “Deductible gift recipient status” it says, “THE SMITH FAMILY is endorsed as a Deductible Gift Recipient (DGR) from 01 Jul 2000.” That means, all donations to The Smith Family are tax deductible donations.

On the other hand, what if we want to donate money to St Albert’s Catholic School in South Australia? When we look up the school’s name, we can see it says, “Not entitled to receive tax deductible gifts.” So, we can give the school money any time we want to, however, the donation is not tax deductible.

It’s easy to keep track of your tax deductible donations to charities

Many Australians lose out at tax time, simply because they forgot about some deductible donations or lost the receipts. That’s an easy problem to fix!

Here are a few ways to keep track:

1. Create a spreadsheet (or another type of document to keep a record). Every time you make a donation, just add it. Include the name of the charity, the date and the amount. At tax time it’s easy to add-up the donations. And if your tax agent asks for details, it’s all right there. Remember to keep the receipts too
2. Keep a simple list of the names of each charity you donate to. Then, at tax time, send each of them an email asking for a summary of your donations in the past taxation year. (If you’re a regular donor, they should send you a summary automatically).
3. Charities should always provide a receipt for your donation. Whenever you give, watch carefully for that receipt. Then save it in one place that you’ll remember at tax time.

Summary: Which charity donations can I claim on my tax return?

To claim tax deductible donations on your tax return, your donation must be:

1. made to a deductible gift recipient charity, and
2. $2 or more.

You must also keep proof (in the form of a receipt or bank statement) of any donation you make as well as the total dollar amount of all donations you make in a tax year.

On top of that, it’s important to be aware of the following important notes:

• If you receive something for your donation (e.g. raffle ticket, pen, bandanna), you cannot claim that donation on your tax return. This is because the ATO sees this as a transaction where you receive goods or a service, in return for the money you donate.
• There are different rules for donating property, shares, and other goods, so please ask us if you’re unsure about how to claim these items.
• Some charities have special rules that limit the donation amount you can claim; this should be explained to you or referenced on your receipt, so that you know how much of your donation is actually a tax deductible donation.

Don’t forget! Like any other tax deduction, you must have a receipt or a payment confirmation email. If you’re given a paper receipt, snap a photo, so you won’t lose it!