the do’s and don’ts of charitable giving

November 30th 2018 | Categories: Tax | Community |

There’s no denying that the holiday season is a time for family gatherings, sharing lots of food and presents galore. It’s also a time when we think about those less fortunate that may not have the opportunity to enjoy these things that we so often take for granted.

Australia is a fairly generous nation and many of us are beginning to replace traditional gift-giving with a donation. If you’ve been thinking about steering from conventional giving of presents to supporting a cause close to your heart, there are a few things to keep in mind. Here’s a few do’s and don’ts of charitable giving.

Do: Research your charity of choice

With around 54,000 charities registered in Australia, choosing the right one to donate to can be a challenge. When making your decision, it’s important that you understand what the particular charity does, how the money is used and that their mission aligns with your personal values.

Do: Know who you’re talking to

Charities in Australia rely on the help of volunteers or third parties. In fact, the Australian Charities and Not-for-Profits Commission (ACNC) reports that nearly half of all charities have no paid staff whatsoever.

This can result in precarious situations, like the Appco class action of 2016 wherein the third party operating for charities was taken to court over the way it treated workers. Just as you should understand who your charity helps, make sure to understand who it is calling you up to ask for donations.

Don’t: Receive material benefits

The debate of whether charitable giving is truly altruistic is one that rages on in philosophical debates, given the satisfaction people often feel when they give. While at the end of the day no real harm comes from this sense of personal pride, receiving other benefits from your charitable giving can have negative consequences.

As defined by the Australian Taxation Office (ATO), “a gift is a voluntary transfer of money or property where you receive no material benefit or advantage”. Givers should avoid kickbacks of any material kind.

Do: Check the DGR list

Despite the above point, there is one legal avenue through which Australians receive a material benefit from charitable giving – their tax. The ATO manages a list of deductible gift recipients (DGRs), and these organisations alone are ones that givers can claim tax deductions for.

Don’t: give the wrong kind of gift

From a tax perspective, you can only give certain things to a DGR in order to claim a deduction. The two categories are money and property, but this is a wide-ranging umbrella that encompasses shares and bonds, too.

From a human perspective, the most precious resource we have is our time. Not everyone has the ability to provide monetary support, but many of us do have time. As we have spoken about, many charities rely on volunteers to continue their work and there are plenty of sites like Volunteering Australia to help you find the perfect fit for you.

Don’t: Stop giving

Despite the complexities involved in some charitable giving and third-party behaviour, making donations – however you do so – is a critical part of sustaining organisations that do vital work in our communities.

Many charities are not self-sustainable. The ACNC reports that 67 per cent of Australian organisations are small, with revenue between $50,000 and $250,000. By helping to keep them afloat with charitable giving, you bring support, education and welfare to those who need it most.

If you’re ever uncertain about where your charity goes, the ACNC acts as a national regulator for the sector, analysing trends and institutions to ensure everything runs smoothly. From an individual perspective, the ATO is a fantastic resource for the intricacies around charitable giving and deductions. And for any further questions about managing where your money goes, the Invest Blue team is always here to help.

What you need to know

This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.