Is there a charity or community organisation that strikes a particular chord with you? If so, now is a good time to make a donation since tax time is approaching. Any charitable donation over $2 is tax deductible, so not only do you feel good and help out a needy cause but you can also minimise some of that dreaded tax you have to pay! While one-off gifts are always great, you may also wish to consider a regular contribution to a particular charity that you wish to support. There are a number of ways you can provide financial support on a regular basis, such as setting up your own private ancillary fund, contributing to an established gift fund or through a workplace giving program.
Prescribed ancillary funds
A private prescribed ancillary fund is a private charitable trust, usually established by an individual or a family, which is required to distribute 5 per cent of its capital each year. In order for these funds to be effective you generally need around $1 million. For those who don’t have this money but are just as keen to help out, there are public ancillary funds. These funds allow you to donate under a master trust, and are also good way of building an endowment without all the costs and complexities associated with running a fund. Establishment amounts for these charities are tax deductible, along with the donations, provided the organisation or entity you donate to is a Deductible Gift Recipient (DGR).
A DGR is an entity that is entitled to receive income tax deductible gifts. A private prescribed ancillary fund will have DGR status if:
• it is endorsed by the Australian Taxation Office (ATO) as a DGR under the DGR category for private prescribed ancillary funds, or
• it is taken to have been endorsed by the ATO as a DGR under the DGR category for private prescribed ancillary funds because it was approved by the government to be a prescribed private fund as at 30 September 2009.
All DGRs must be endorsed by the ATO, unless they are listed by name in the income tax legislation or regulation. Therefore all prescribed ancillary funds must go through the approval for organisations that wish to be endorsed by the ATO as DGRs.
Many organisations are involved in workplace giving, which involves employers making a pre-tax deduction from an employee’s pay. The company then matches the donation amount and sends the money to the employee’s chosen charity. Since donations made this way are allowed to be deducted from your pre-tax income, this has become a popular method of donation. A survey in 2004 suggested that less than 1 per cent of Australian employees took part in payroll giving and about $18 million was raised, so there is a lot of potential for life changing donations to be made.
Other great examples of tax deductible donations which you can make regularly are charity gift vouchers and charity gift registries for birthdays and weddings. Some fun charity ideas that go to a good cause and you can easily implement in your office or become a part of include:
• Harmony Day’s Taste of Harmony Week to promote multiculturalism
• Red Nose Day to support SIDS and kids
• Jeans for Genes Day for children’s medical research
• Daffodil Day to help the Cancer Council
• Loud Shirt Day for deaf children
• Pink Ribbon Day for breast cancer
• RSPCA Million Paws Walk to help the animals
• Movember to raise funds for prostate cancer
As long as your gift is $2 or more and the recipient is a deductible gift recipient (DGR) registered with the Tax Office – and the gift is made freely and without conditions – then the donation will be tax-deductible. So make your donations now with tax time fast approaching and be sure to keep some proof, such as a receipt. That way when it comes time to complete your return you can help yourself by potentially lowering the amount of tax you pay, as well as helping others. For more information on charitable donations or any other tax issue, the accountants here at The Quinn Group can assist. Please submit an online enquiry or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.