Is it a gift or contribution?
When you give a gift or make a contribution to a NFP that is a deductible gift recipient (DGR) you may be able to claim a tax deduction. The amount you can claim will depend on the type of gift or contribution you make.
- A gift is a donation of money or property made voluntarily with no material benefit to the donor. It must fall within our definition of a 'gift type'.
- If you receive a material benefit – that is if the donor receives something which has a monetary value from the DGR in return for their donation – the donation is called a contribution.
You will follow different rules for claiming tax deductions depending on whether your donation is a gift or a contribution.
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People can donate to NFP's in whichever way they please.
However, when you are seeking tax deductions, 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.
Who can claim?
A tax deduction for a gift is claimed by the person or organisation that makes the gift (the donor). A donor can be:
- An individual
- A company
- A trust
- Another type of taxpayer.
What is not a gift for tax purposes?
The following examples are not gifts:
- buying items at a charity auction
- purchases of raffle tickets and art union tickets
- buying chocolates, pens and similar low cost items
- the cost of attending a fundraising dinner or concert, even if the cost exceeds the value of the dinner
- membership fees
- making a payment to a school building fund as an alternative to an increase in school fees
- providing a service – for example, a volunteer can't claim a deduction for their expenses in carrying out the voluntary work or the value of their unpaid work
- any payments made if you have an understanding with the donor that the payments will be used to provide a benefit to them
- gifts made under a will
- gift vouchers donated to a DGR.
What is a contribution?
You receive a material benefit in return for your contribution (for example, you purchase a ticket to a fundraising dinner).
For a contribution to be tax-deductible, it must:
Who can claim?
A tax deduction for a contribution can only be claimed by an individual taxpayer.
Advertising or sponsorship
If you are a business and you support a DGR through advertising or sponsorship this is generally not a gift. You may be able to claim a tax deduction as a business expense.
When you make a gift, you do not receive a material benefit in return for your payment. When you make a contribution you do receive a benefit in return.