Posted by Tax Advisor on 4 April, 2014
What Goes Around, Comes Around.. especially when it’s time to report tax deductible donations.
If you are interested in receiving tax back on your Australia tax return, you should know the 8 general types of tax deductions . Why? Claiming deductions lowers your taxable income which means more tax back!
More specifically, one the eight deductions- tax deductible donations, lower your taxable income. Not only that but also the obvious…. your donations help others!
If you have a heart and the money to make donations, you’ll be rewarded in the form of a tax deduction.
There are Four Rules of Claiming a Gift & Donation Deduction
If you are interested in making a donation or gift because (let’s be honest), you don’t want to owe tax when it’s time to lodge your 2014-2015 taxes, then be sure to follow the four claiming conditions by asking yourself the following questions;
1. Are you making the donation to an “ATO approved” charity?
The donation must be to a DGR or Deductible Gift Recipient in order to be tax deductible. You can learn what organisations are considered DGR by visiting the ATO’s Deductible Gift Recipient site.
2. Is it truly a gift?
A gift is a gift if it is a voluntary transfer of money or property.
The gift can not be exchanged for a service, item, or something you would benefit from.
3. Does it fall into a “gift-type” category?
The gift type can be money, property or shares.
4. Does it follow gift conditions?
There may be certain conditions to your donation, depending on what DGR it was donated to. For example, some DGRs only accept certain types of gifts. To learn specific gift conditions, visit the ATO’s website.
In order to claim a deduction for a donation, you must answer “yes” to all of the above questions. If not, it won’t be considered tax deductible by the ATO.
Save Evidence of your Donations
When it’s time to prepare your taxes, you’ll need the basic info and amounts of your donations to be listed as a deduction on your tax return. If you do not have a receipts for any of your donations, you might need other statements (such as bank statements), to show your tax deductible donations are legitimate.
It’s good to know a DGR is not required to provide you with a receipt, although they may. In the case that they (the DGR) gives you a receipt, you’ll definitely want to save it.
A DGR receipt should include the following;
that your donation is a gift
the name of the organisation, authority, etc