Maximising Tax Deductions for Charitable Giving

Millions of Australians donate to charities each year to support meaningful causes, yet many miss out on valuable tax deductions that could benefit both themselves and the organisations they support. With the end of the financial year approaching, experts stress the importance of being strategic about how and when donations are made. This is especially relevant amid rising asset values and recent changes to tax rules affecting superannuation.

Charities are increasing efforts to encourage donations before June 30. However, data from the Australian Taxation Office shows a decline in the number of people claiming deductions, even though total donations have more than doubled to $4.5 billion over the past decade. Independent research found that more than 21 million Australian adults gave to charity last year, but only about 4.3 million claimed a related tax benefit. This gap reveals how many people are not making the most of their generosity from a financial perspective.

Several common issues contribute to missed deductions. These include donating in the name of a lower-earning spouse, contributing through non-registered platforms such as personal crowdfunding pages or failing to keep receipts. Donations of $2 or more to approved organisations are tax-deductible. However, if a benefit is received in return, such as an event ticket, the deduction may no longer apply. Advisors recommend making donations in the name of the higher-earning spouse, which could lead to tax refunds of up to 47% depending on income.

Philanthropy is also evolving as wealth estimated at $3.5 trillion begins to transfer from baby boomers to younger generations. This shift is encouraging more structured giving through tools such as private ancillary funds or sub-funds within public foundations. These options can be started with as little as $20,000 and allow donors to contribute over time while also addressing immediate tax obligations. This is particularly important as new superannuation taxes take effect.

At a broader level, awareness of tax-efficient donation strategies is growing in line with increased interest in giving and long-term financial planning. Charities are responding by offering tools such as donation impact calculators and promoting deductible options. Whether the goal is to make a social impact now or reduce future tax liabilities, more Australians are viewing charitable giving as a smart part of their overall financial strategy.

Source: The Australian, Australian Taxation Office, UNICEF Australia