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Can you claim a tax deduction for Christmas gifts and donations?

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As we enter the festive season, we also enter the peak period for charitable giving, as many choose to focus on those less fortunate than themselves who, for whatever reason, won't be able to fully enjoy all that the Christmas season brings.

Obviously, the motivation for making a charitable donation at Christmas time is to help others but it's worth bearing in mind that in many circumstances, giving to charity is also tax deductible. So what do you have to do to ensure that you can get tax relief next time you lodge your tax return?

The basics

You can only claim a tax deduction for gifts or donations to organisations which are deductible gift recipients (DGRs). Most major charities are DGR's but if you're not sure, you can check here: http://abr.business.gov.au/DgrListing.aspx.

christmas charity gifts donations tax

When you make a gift, you do not receive a material benefit in return for your payment. This is contrasted with a contribution (for example, purchasing a ticket to attend a fundraising dinner) where you receive a benefit in return.

For you to claim a tax deduction for a gift, it must meet these conditions:

    • The gift must be made to a deductible gift recipient (DGR).
    • The gift must truly be a gift. A gift is a voluntary transfer of money or property where you receive nothing in return.
    • The gift must be money or property, which includes financial assets such as shares.

So can I get tax relief if I make charitable donations instead of buying conventional presents?

What do you buy for the person who has everything? Increasingly, the answer is that you make a charitable donation on their behalf or buy a gift from a charity. So, how does that fit with the rules above?

If you actually purchase a physical gift from a charity (like a soft toy emblazoned with the charity logo or a pack of Christmas cards), that's not tax deductible because you're getting a personal benefit (ie, something in return) but if you're giving a gift of cash that is then used to, say, buy a chicken for a third world village which will then provide food for the villagers, then that's tax deductible.

How much to claim?

For gifts of money, you can claim a deduction where the amount of the gift is $2 or more. For gifts of property, there are different rules, depending on the type of property and its value.

You can claim the deduction in the tax return for the income year in which the gift is made.

Your receipt - which you will need to substantiate the deduction - should tell you whether or not you can claim a deduction.

If you used the internet or phone to make a donation over $2, your web receipt or credit card statement can be used to substantiate the deduction. If you donated through third parties, such as banks and retail outlets, the receipt they gave you is also sufficient. If you contributed through "workplace-giving" your payment summary shows the amount you donated.

What you can't claim

You can't claim as a gift or donation anything that provides you with a personal benefit, such as:

    • raffle tickets.
    • items such as chocolates and pens.
    • the cost of attending fundraising dinners, even if the cost exceeds the value of the dinner (but see below).

Contributions

If you attend a fundraising event, such as a Christmas or New Year ball, you may still be able to claim a tax deduction even though the payment you have made is not regarded as a gift for tax purposes.

You can claim a portion of your contribution to the event as a tax deduction if the contribution is for an eligible fundraising event, organised for a DGR and conducted in Australia, including fetes, balls, gala shows, dinners, performances and similar events

If you make a contribution of money (such as buying a ticket), you can only claim a deduction if the amount spent is over $150. If you make a contribution of property, the property must be valued at more than $150 (if purchased within 12 months of making the contribution) or $5000 (if purchased more than 12 months before the contribution).

Fundraising events held by political parties are ineligible for this concession.

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Mark Chapman is director of tax communications at H&R Block, Australia's largest firm of tax accountants, and is a regular contributor to Money. Mark is the author of Life and Taxes: A Look at Life Through Tax.
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