Gift types and conditions
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People can donate to charities in whichever way they please.
However, if donors are seeking tax deductions for their donations, certain rules apply. This includes the gift meeting the following requirements. The gift must:
What is a gift?
- There is a transfer of money or property
- The transfer is made voluntarily
- The donor does not expect anything in return for the gift
- The donor does not materially benefit from the gift.
If the donor benefits from the donation, it may still be tax-deductible as a contribution.
Tax deductible gift types
To be tax deductible, a donor's gift must be covered by what we call a ‘gift type’.
If their gift falls into more than one gift type category, they can choose the gift type that is most appropriate.
If someone donates any of the following to your DGR they may be able to claim a tax deduction:
- Money: Gifts of $2 or more
- Property: As well as physical things (such as land and objects), property includes rights and interests that can be owned and have a value (such as shares and ownership rights)
- Cultural items: If your organisation is a public art gallery, museum or library the Cultural Gifts Program allows you to receive gifts of cultural items. These donations are exempt from capital gains tax (CGT) and your donor may be able to claim a tax deduction
- Heritage gifts: If your organisation is a National Trust and you receive a heritage gift to preserve it for the benefit of the public, your donor may be able to claim a tax deduction.
Acknowledgment in appreciation of a payment
Even if you give the donor a small token in acknowledgment of a payment, the payment may still be a gift.
For example you may give a donor the following for a gift:
- a sticker or lapel badge
- a mention in a newsletter or periodical
- a plaque, if it is of small cost and prominence.
However, if you give larger acknowledgments for example in the form of commercial advertising, it may prevent the payment from being a gift. If a donor incurs advertising and sponsorship expenses when deriving assessable income they may be able to claim a tax deduction as an expense, rather than as a gift.
If you are conducting an appeal for more than one purpose (and not all of the purposes are for the benefit of DGRs), your donor must state how much of their gift will be given to the DGR.
Your donor can make a pledge on a contribution envelope or a pledge form to the fundraising body, specifying the name of each DGR and the amount or percentage of the total to be applied to each DGR. Your donor can only claim a deduction for the amount of the gift donated to DGRs.
Alternatively, the terms of the appeal may state the proportion to be applied to each DGR. Your donor can claim a deduction for the stated proportion of the gift.
To be tax deductible, your donor's gift must be covered by a gift type, the most common one being a gift of money of $2 or more. Their gift may meet the requirements of more than one deductible gift type – they can use the gift type that is most appropriate for the gift.
Example – Split DGR fundraisers
Sandy is a parent of a year seven student. Her daughter's school is asking for annual donations to:
- The year seven netball team
- The debating society
- The school building fund.
The school is endorsed as a DGR only for its school building fund - meaning only funds to the school building fund are deductible. Sandy decides to donate $50 to the netball team, $20 to the debating society, and $30 to the school building fund. Sandy fills out the form provided by the school, which clearly shows where she would like her money donated. Sandy can claim $30 as a tax deduction, as the school has DGR status for the building fund only.
End of example