Most Australians are well aware of just how lucky we are, making charitable donations is one way we try to assist those less fortunate.
Giving to charities is a common practice for many, with the RaboDirect National Savings and Debt Barometer 2012 showing that 20 per cent of Australians across all income brackets give at least $500 to charity each year. While we are aware that charitable donations can attract tax benefits, it seems that most of those giving to charity neglect the process, and as a result do not reap the financial benefits.
Understanding the tax benefits
We’ve heard the term “tax deductible”, but what exactly does it mean? Put simply, so long as the organisation to whom you have donated is one of the thousands of registered deductible gift recipients (DGRs), and your donation is over $2, you are able to claim it as a deduction.
A tax deduction essentially reduces the income on which you pay tax, so in essence the donation is viewed as an expense, and you are reimbursed for tax for that amount. After a moment of generosity, some people may be put off by the word deduction, feeling that it may take away from the gesture. However, it is important to remember that any money credited back to you comes from the ATO and in no way affects the amount that the charity receives.
Maximising the benefits
Because the financial year ends on June 30, making larger charitable donations close to this date means that you are able to receive the return sooner. Alternatively, putting the money into a savings account or term deposit earlier in the year before donating it in June can allow for interest to accumulate, and then tax deductions are claimed.
Direct debit donations
While lumps-sum donations can be useful for larger amounts, and for those with the financial means, for those interested in smaller or more regular donations, direct debit donations can be a great option.
In many ways, setting up a direct debit schedule can mean year-round giving with minimal impact to your financial situation. It is easy to set up either a one-off donation or an ongoing contribution, and with the convenience of internet banking, you can do this from the comfort of your home or workplace.
Making charitable donations via an online account also has the added benefit of records being conveniently maintained. This not only means tax time is easier and more efficient, but you are able to evaluate your donations at the end of the year, and determine the amount you wish to contribute the following year. It’s also a great reminder of the positive things your money has contributed to achieving.