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#AccountingAnswers - Is donating to charity tax deductible?

#AccountingAnswers - Is donating to charity tax deductible?

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Is donating to charity tax deductible?

There’s three rules at play:

  1. Is it more than two dollars?
  2. Are they a DGR? You want to ask the provider that.
  3. Are you a profitable business?

Now, why three is important is because of the ATO.

If you are in loss, they’re going to give you the benefit of not paying any tax that year.

So, you can’t get an additional tax deduction when you’re already in loss!

So… Let me give you four examples using Hummingbird House – which is the charity we love to support here are Inspire.

Hummingbird House is Queensland's only children’s hospice.  Inspire recently raised $1,724.63 for HH and we aim to raise another $2,000 at our next Inspiring Business Event.

Is it Tax Deductible?:  $3 in a can for Hummingbird House

Would that be tax deductible?  YES.  

Because -

  1. It is over $2.
  2. Hummingbird House is a DGR.
  3. We are a profitable small business that is paying its fair share of tax.

Lets give another scenario…

Is it Tax Deductible?:  $10,000 transfer to Hummingbird House bank account.

Well, first off… Paul and Gabrielle Quilliam (the founders of Hummingbird House) would be very happy with you.

And second, that would be tax deductible because it’s over $2, they are a DGR and you are profitable (if you’re not a profitable business or as profitable as you’d like to be, come along to our next Cash Rich Business Workshop)

Is it Tax Deductible?:  a $250 ticket to the Hummingbird House Gala Dinner, May 21.

NO.

And here’s why:

There’s a fourth rule -

If you receive a benefit in return for your giving, you can’t receive a tax deduction.

So in scenario 1 and 2 when you gave $3 and $10,000, it was a one way gift.

However, when you pay for a Gala Dinner ticket, you receive a lot of benefit in return.

  • Delicious 3 Course Meal
  • Unlimited Drinks
  • Great Entertainment

I really encourage you to save the date May 21st because it is an absolute ball.

Excuse the pun.

The Hummingbird House Gala Dinner is not tax deductible as a charitable gift because you receive value in return.  Lot’s of value!

Is it Tax Deductible?:  You sponsor the Gala Dinner and receive tickets for your family, team, clients and prospects.

YES!

Not because it is a charitable giving…

But because it is a marketing activity.

And I really encourage you to do this.

Inspire has a dream to reserving a giant table of 100 at the Hummingbird House Gala Ball, May 21.

RSVP here and we’ll let you know the plan: https://www.facebook.com/events/994697667250287/

Be it tax deductible or not, my recommendation is to -

“LIVE EVERYDAY, GIVE EVERYDAY.”

It’s the most rewarding way of life.

If your giving turns out to be a tax deduction, treat it as a bonus!

See you on the 21st!

At Inspire CA (Chartered Accountants) we are number people and we believe Family is Number 1.

If you’d like some advice on reducing the amount of tax you pay (so you have more to give!) then feel free to book in a 10 min call with one of our Advisors.