For a donor to claim a tax deduction for a gift, the payment must:
be truly a gift
be made to a DGR
be a gift of money or a certain type of property, and
comply with any relevant gift conditions.
What is a gift?
Not all payments to DGRs are tax deductible. Gifts have the following characteristics:
there is a transfer of money or property
the transfer is made voluntarily
the transfer arises by way of benefaction, and
no material benefit is received by the donor.
Examples of payments that are not gifts include:
purchases of raffle or art union tickets
purchases of items such as chocolates and pens
the cost of attending fundraising dinners, even if the cost exceeds the value of the dinner
membership fees
payments to school building funds as an alternative to an increase in school fees, and
payments where the person has an understanding with the recipient that the payments will be used to provide a benefit for the ‘donor’.
Gift conditions
For some DGRs, the income tax law adds extra conditions affecting the kinds of deductible gifts they can receive.
The gift may only be tax deductible:
between certain dates, or
for a specific use.
Donors should ask DGRs if conditions apply.
How much can be claimed?
The amount of the deduction depends on the type of gift. For gifts of money, it is the amount of the gift. For gifts of property, there are various valuation rules.
The deduction for a gift cannot add to or create a tax loss.
In certain circumstances, donors can elect to spread a gift deduction over a period of up to five years.
What records do donors need?
Donors should keep records of their deductible gifts, including:
the date the gift was made
the name of the DGR to which the gift was donated
the amount of the gift
any elections to spread the deduction, and
a description of the gift if it was property.
When property has been gifted, additional details may need to be recorded. This will help when preparing tax returns and in case claims are checked by the Tax Office.
DGRs are not required by the income tax law to issue receipts for deductible gifts, but any receipts issued must specify:
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