Claiming donations and gifts as tax deductions

There are rules in place around what gifts and charitable or other donations you can claim as tax deductions in Australia, as Director of Tax Communications at H&R Block, Mark Chapman, explores for Canstar.

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What is a gift for tax purposes?

You can only claim a tax deduction for gifts or donations to organisations which are deductible gift recipients (DGRs). You can check whether an organisation is a DGR on the Australian Government’s ABN Lookup website. Most major charities are DGRs.

When you make a gift, you do not receive a material benefit in return for your payment. This is contrasted with a contribution (e.g. purchasing a ticket to attend a fundraising dinner) where you receive a benefit in return.

For you to claim a tax deduction for a gift, typically it must meet these conditions:

• The gift must be made to a deductible gift recipient (DGR).
• The gift must truly be a gift. A gift is a voluntary transfer of money or property where you receive (and expect to receive) nothing in return.
• The gift must be money or property, which can include financial assets such as shares.

What gifts are tax-deductible?

For gifts of money, you can claim a deduction where the amount of the gift is $2 or more.

You can claim the deduction in the tax return for the income year in which you gave the gift.

Your receipt – which you will generally need to substantiate the deduction – should tell you whether or not you can claim a deduction. If the DGR didn’t give you a receipt, the Australian Taxation Office (ATO) advises you can still claim a deduction by using other records, such as bank statements.

If you used the internet or your phone to make a donation of at least $2, you should be able to use your web receipt or credit card statement to substantiate the deduction. If you donated through third parties, such as banks and retail outlets, the receipt they gave you is also sufficient. If you contributed through a ‘workplace giving’ program, your payment summary shows the amount you donated.

Bushfire and flood donations

If you make a donation of $2 or more to bucket collections run by a DGR for victims of natural disasters such as bushfires and floods, you can claim a tax deduction for your contributions without a receipt, provided the contribution does not exceed $10.

What can’t you claim?

You normally can’t claim as a gift or donation anything that provides or could provide you with a personal benefit, such as:

• raffle tickets
• items such as chocolates and pens
• the cost of attending fundraising dinners, even if the cost exceeds the value of the dinner (but see below)
• payments to school building funds made, for example, as an alternative to an increase in school fees

What contributions can you claim?

If you attend a fundraising event, you may still be able to claim a tax deduction even though the payment you have made is not regarded as a gift for tax purposes.

You can claim a portion of your contribution to the event as a tax deduction if the contribution is for an eligible fundraising event, organised for a DGR and conducted in Australia, including fêtes, balls, gala shows, dinners, performances and similar events.

If you make a contribution of money (such as buying a ticket), you can only claim a deduction if the amount spent is over $150. If you make a contribution of property, the property must be valued at more than $150 (if purchased within the 12 months before you make the contribution) or $5,000 (if purchased more than 12 months before the contribution).

Fundraising events held by political parties are ineligible for this concession. If the contribution is made to a political party, see below.

Political contributions

Political parties are not DGRs. However, in some circumstances, gifts and contributions made by individuals to political parties and independent candidates and members can be claimed as income tax deductions.

To claim a deduction, contributions must be $2 or more. The most you can claim each tax year is:

• $1,500 for contributions and gifts to political parties
• $1,500 for contributions and gifts to independent candidates and members

Businesses can’t claim deductions for political contributions.

Do you have to declare gifts you receive on your taxes?

Assuming you aren’t a DGR, gifts that you receive (perhaps for a wedding, or a birthday) aren’t taxable and you don’t need to declare them for tax purposes. The exception is where the ‘gift’ is really something else entirely. If you’ve received an amount of income that is described as a ‘gift’ but is actually taxable, you’ll be taxed on the substance of the transaction (i.e., what the ‘gift’ really is) rather than the form (i.e., the ‘gift’ itself).

An example might be receiving a monetary ‘gift’ from parents, and at the same time agreeing to give up certain rights in the family company. The parents or the child might argue that the two are unconnected, but the ATO may make a connection between the two events and argue that the ‘gift’ is really consideration or payment for giving up the rights.

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