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Note: This document forms part of our publication GiftPack.
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Certain deductible gift recipient (DGR) fundraising events encourage contributions that may, at the same time, give some minor benefits to the contributor. As a benefit is received in return, the contributor is not entitled to claim the contribution as a tax deductible gift.
However, contributions made by individuals to DGRs in relation to DGR fundraising events such as fetes, balls, gala shows, dinners and charity auctions may be tax deductible.
To be deductible, a contribution must meet several requirements:
- the contribution must be made to a DGR for
- a right to attend or participate in a fundraising event in Australia, or
- the purchase of goods or services as a successful bidder at an auction that is, or is at, a fundraising event in Australia
- the contribution must satisfy any gift conditions relating to the DGR as though it was a gift, and
- the contribution must be made by an individual.
For contributions made on or after 1 January 2007:
- the contribution must be more than $150 (and can include certain property contributions), and
- the GST-inclusive value of the right or the goods or services (the benefit) must not be more than $150 or 20% of the value of the contribution, whichever is less.
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For contributions made to a DGR before 1 January 2007, the contribution threshold was $250 and the benefit threshold was the lesser of $100 and 10% of the value of the contribution.
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Testamentary contributions, that is, contributions made under a will, are not tax deductible.
If the contribution is a gift, a deduction may only be claimed as a gift. See What is a gift.
DGRs
All categories of DGR (except the Commonwealth for the purposes of Artbank) can receive deductible contributions.
For some DGRs, contributions are deductible only if made to some part of the DGR.
Example
A local government council is endorsed as a DGR only for its library, so only deductible contributions made to the library are tax deductible. Contributions made to the council's neighbourhood program, for example, are not deductible.
Contributions of property
The following contributions of property made in return for a right to attend or participate in a fundraising event may be deductible contributions:
- property valued by the ATO at more than $5,000 and not purchased during the 12 months before making the contribution
- property valued at more than $150 and purchased by the contributor during the 12 months before making the contribution, and
- shares acquired by the contributor in a listed company that have a market value of $5,000 or less, and were acquired at least 12 months before making the contribution. The contribution must be made on or after 1 July 2007.
Where the eligible event is a fundraising auction, only contributions of money are eligible for a deduction.
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Property is purchased if it is acquired by way of bargain or sale for money or some other valuable consideration.
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It is up to the individual and not the DGR to find out the value of a contribution of property.
For contributions of property valued by the ATO at more than $5,000, see the valuation section for Property > $5,000.
For property purchased by the contributor during the 12 months before making the contribution, see the valuation section for Property < 12 months.
For shares valued at $5,000 or less, see the valuation section for Shares ≤ $5,000.
Gift conditions
A deductible contribution to a DGR must also satisfy any gift conditions applicable to the DGR as though the contribution was a gift.
For some DGRs, the law adds extra conditions affecting the types of deductible gifts they can receive. The gift or contribution may only be tax deductible if made:
- between certain dates, or
- for a specific use.
A contribution is made for a specific purpose of the gift condition if the fundraising event is staged for that purpose.
The gift conditions for the general DGR categories are set out in the DGR table. Many categories of DGR have no gift conditions.
Example
XYZ Agency is endorsed as a DGR under the general DGR category 'Public authority for research'. To satisfy the gift conditions for public authority for research, the contributions to XYZ Agency must be made for fundraising events staged to raise funds for the purposes of research into the causes, prevention or cure of disease in human beings, animals or plants.
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Refer to Fundraising (NAT 13095) for information about determining the value of a minor benefit.
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Who can claim a tax deduction?
Individual taxpayers who have made deductible contributions may claim a tax deduction. In order to claim tax deductions, they need to know:
- how much can be claimed
- when contributions can be claimed
- what records are required, and
- other income tax consequences of making a contribution.
How much can be claimed?
The deduction is limited to that part of the contribution that is more than the benefit received in return for making the contribution.
Example
Phillip pays $300 to attend a play hosted by a DGR, which is open to the public and costs $30 a ticket on the open market. Phillip can claim a deduction of $270 ($300 - $30).
An individual attending a fundraising event may claim two contributions for the right to attend the same fundraising event, but no more (for example, one for the individual and one for the individual's partner).
There is no limit to the number of deductions that may be claimed for the purchase of goods and services by way of successful bids at a fundraising auction. An individual may claim a deduction for both attending a fundraising event (for example, a fundraising dinner auction) as well as for the purchase of goods or services as a successful bidder at the auction.
Example
Rebecca makes a payment of $260 to attend a charity auction conducted by a DGR. The ticket to the auction has a market value of $20. At the auction, Rebecca successfully bids $2,000 for a chair with a market value of $90. She also bids $1,000 for a painting with a market value of $100. Rebecca can claim three separate deductions: one of $240 for her contribution for the right to attend the auction, one of $1,910 for the purchase of the chair at auction and a further $900 for the purchase of the painting at auction.
The deduction for a fundraising contribution cannot add to or create a tax loss. The deduction can reduce assessable income for the tax year to nil but any excess cannot be claimed in the year it is made or any later year.
Example
Dominic's assessable income in his tax return for 2008-09 is $15,000. The deductible portion of contributions he makes to DGRs during that year is $20,000. He has no other income or deductions in his tax return.
The tax deduction he can claim for his contributions is limited to $15,000. This is because a deductible contribution cannot add to or create a tax loss.
Dominic's taxable income therefore becomes nil and the excess $5,000 from his contributions claim cannot be carried forward to a later tax return.
When can contributions be claimed?
A tax deduction for a contribution is claimed in the tax return for the income year in which the contribution is made.
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Donors should refer to TaxPack for information on how deductible contributions can be claimed in the tax return for the year in which the contribution was made.
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What records are required?
Individuals should keep records of all their deductible contributions to help prepare their tax returns and as evidence if their claims are checked by the ATO.
DGRs are not required by tax law to issue receipts for deductible contributions, but if they do, the receipt must specify:
- the name and ABN (if any - some DGRs listed by name might not have an ABN) of the DGR
- the fact that the contribution was made for
- a right to attend a specified fundraising event, or
- the purchase of goods and services as a successful bidder at a fundraising auction
- the amount of the contribution (if money)
- the GST-inclusive market value of the right or the goods or services (the benefit) received in return for the contribution.
Other useful information for contributors includes:
- the date the contribution was made, and
- a description of the contribution if it was property.
When property has been contributed, contributors may need to keep the date of acquisition, the amount paid for the property and any valuations.
Other income tax consequences
If an individual can or has claimed a deduction in relation to a contribution and receives a refund or reimbursement of a contribution from a DGR or another person, the amount received or reimbursed must be included in assessable income, but only to the extent that the reimbursement does not exceed the deduction.
For other income tax matters to consider when making deductible contributions or gifts, see Other income tax matters.
Last Modified: Wednesday, 22 June 2011