Advivo Business Advisors and Accountants look at the best ways to donate to your favourite charities.
Donating to charities gives you that warm feeling, and in some circumstances, it can also have the bonus of boosting your tax deductions. However, deciding who to donate to and understanding if you can claim it in your tax return isn’t always straightforward.
Many charities are doing great work supporting their cause and many of us are forever looking for ways to help or give back ourselves. So how do we ensure our donation can provide the biggest bang for buck possible?
There are several methods of making donations including:
- Contributing cash;
- Contributing goods; and
- Contributing time.
Each of these will have different pros and cons depending on your personal circumstances, but first I’d like to share the reason I recommend claiming donations as income tax deductions where possible.
A while back I was explaining to a client, various methods of achieving tax deductions for each of the above. Their response was along the lines of, “I’m not doing it for the tax deduction so I’d rather not to claim it”.
This person was an average income earner and extremely passionate about their chosen cause, finding many ways to contribute as much as they could. In their instance, the tax benefit of claiming their deductions added up to over $600.
If they were to have claimed their donations, they would not only be supporting their charity of choice, but they would have also saved $600 in tax, providing them with additional resources to be able to contribute even more. This is a clear win/win in my books.
Monetary donations may not always the most suitable method for donating. Many charities benefit from receiving donations of goods. In many cases it’s possible to calculate the value of the goods being donated which in certain circumstances can also provide for a tax deduction to be claimed.
In other conditions, the donation of time is preferred, and whilst it may be possible to claim a donation for time , there are many benefits to be gained from this, with an income tax deduction being just one of them. Charitable giving can be seen as good PR and it makes sense for business, especially for small businesses that depend on their communities to keep them afloat.
There are several charities who utilise groups of volunteers to pack goods for those who are disadvantaged. Why not use this as a team building exercise for your business’s Christmas break up event? You can always follow it up with your choice of other festivities afterwards. Team culture is so important for many businesses and this is another great way to achieve a win/win for all involved.
Remember to keep receipts and get advice for larger donation amounts. The ATO says you should keep records of donations to Deductible Gift Recipients for five years after lodging a claim in your tax return, as they can request proof from you in that time frame.
Understanding the different viable options for donating to charities can be complicated and the team at Advivo are here to help you navigate the best option for you. Contact us today.
Written by Chris Morris, Advivo Partner