As an employer you can set up a workplace giving program and ask your employees if they want to participate. It's an effective way for employees to regularly donate to charities or organisations. Both you and the employee must agree to participate.
Workplace giving is an optional, simple and effective way for employees to regularly donate to charities or organisations that are entitled to receive tax deductible donations.
Employee workplace giving information is subject to privacy laws. You cannot release information to participating charities without the express written permission of each employee.
If you decide to start a workplace giving program, you will need to select the charities you want involved in your program – you can choose one or several charities.
To participate in the program, each charity or organisation (such as a library or university) must have deductible gift recipient (DGR) status. If you know the charity's Australian business number (ABN), you can check its DGR status by:
- visiting the Australian Business Register website
- phoning our Non-profit organisations area.
If the charity or organisation has DGR status, you can invite them to participate in your workplace giving program, and ask them for account deposit details so you can make lump sum deposits.
To find out if your employees want to participate, provide them with a list of the charities you have selected to be involved in your workplace giving program as well as whether:
- there will be a minimum donation amount per pay for each participating employee
- you will reduce the amount of tax you withhold from the participating employees' salaries to account for the amount donated each pay. Small donations will result in no or little change to the amount of tax to be withheld.
Employees who would like to participate then need to provide you with details of how much they will donate each pay and which charities they would like to donate to (from those you have selected).
You can start deducting the agreed donation amount from the income you pay to each participating employee and forward it to the relevant charity as a lump sum.
The workplace giving program does not affect the way your employees' gross income, super guarantee payments or fringe benefits are worked out.
Keep your employees informed
You will need to keep records of the amount donated on behalf of each employee and advise them in writing of the total amount donated at the end of the financial year. You can notify them by:
Letter or email
If you choose to provide this information to your employees in a letter or email, you must provide:
- your name and ABN
- the employee's name
- the total amount donated for the year
- that the amount was donated to a charity
- the financial year in which the donation was made.
You may choose to provide the information in the employees' payment summaries:
- ATO payment summaries have a 'Workplace giving' section where you can include the total amount of donations for the year.
- Self-print payment summaries will need a new line of text in the deductions and include 'Workplace giving' and the total amount of donations for the year.
There is no need to list each charity.
When your employees complete their tax returns
Your employees' individual tax returns are not affected by workplace giving.
Donations made under a workplace giving arrangement and donations made direct to charities are reported in the same way on the tax return. This is regardless of whether you reduced the amount of withholding or not.
The way you work out withholding for donations depends on whether the donations are regular or an occasional donation.
When you set up a workplace giving program, you need to decide whether or not to reduce the amount of tax you withhold from the salaries of your participating employees to account for the amount donated each pay.
To work out the reduced amount of tax to withhold from participating employees who make regular donations, you reduce the gross earnings by the total donation amount and use this reduced earnings figure to calculate the amount to withhold.
In some circumstances, small donation amounts will result in no or minimal change to the amount of tax to be withheld.
Using a software payroll package
If you use a software payroll package, you will need to check whether it is able to calculate these deductions automatically for each pay period.
If your payroll software can't reduce the amount of tax withheld each pay period, you can still set up a workplace giving program but will not be able to reduce the withholding tax; each participating employee will be able to claim a deduction when lodging their tax return at the end of the income year.
You can vary the amount of tax you withhold from the salary of an employee who makes donations to a charity under an occasional workplace giving arrangement.
This variation should be used when donations are not made under a regular planned arrangement, for example:
- a one-off donation of $250 to Make a Wish Foundation in March
- a one-off donation of $500 to Cancer Foundation in May.
Employees receive the tax benefit of the donation at the time they make the donation, instead of waiting until the end of the financial year when lodging their tax return.
Working out withholding for occasional donations
To work out the amount of tax to withhold when occasional payroll donations are made:
- Calculate the amount of withholding required from the employee’s gross earnings for the relevant pay period (before deducting the donation).
- Multiply the amount of the donation by 0.34, and then subtract from the withholding figure calculated at (1).
If the resulting withholding amount is zero or negative, there is no amount to withhold.
See alsoHow to set up a workplace giving program and ask your employees to participate to donate to charities or organisations.