Small Business Charitable Giving and Tax Deductions: Complete Guide

Tuesday, 10 Nov 2020

Small businesses often become an ingrained part of local communities due to their influence on the surroundings. The loyalty they receive from their customers in the region is often paid back through donations and gifting towards the greater good.

Since the holiday season is approaching, several small businesses in Melbourne are gearing up to give back to their communities. The gesture usually ranges from offering cash donations to offering assets to not-for-profits.

In every way, it gives the business a sense of fulfilment and helps in acquiring goodwill in the community. Another advantage of giving gifts and donations is that the business can claim tax deductions for making donations to organisations that are eligible to receive tax-deductible gifts.

Your bookkeeper in Melbourne can help you find such organisations so that you can make the most of your donations. If you are not aware of these tax deductions, then here is a complete guide on the same. Let us have a look.

Conditions for Claiming Deductions on Charitable Giving

  • As a business owner in Melbourne, you can claim a tax deduction for donations and gifts that are given to deductible gift recipient (DGR). However, you need to know that all charities are not DGRs. For example, if you are donating to an organisation that is raising money through crowdfunding, then it will not be entitled to receive tax-deductible gifts. Your bookkeeper can help you to identify the DGR charity for gifting, or you can look up for one online through ABN Lookup.

  • The donation should not be made with the intention of getting something in return. It should be a philanthropic gesture that should involve the transfer of money or property without getting any material or intangible gain from the receiver. The gift could also be shares or any other business asset. A small business can receive a small token from the DGR that has no significant value and is only a marketing tool, such as stickers and lapel pins.

  • Charitable giving should follow the regulations related to gifting DGRs in Melbourne. It is important because while donating to some of the DGRs, you must follow additional guidelines to ensure they are eligible to receive a specific gift.

Recordkeeping Is Essential for Donations Too

Recordkeeping is an essential part of bookkeeping, and every transaction must be included in it. Your bookkeeper will inform you about maintaining the records of all the donations made by the business.

The records can be maintained by either safely entering the receipt given by the DGR into the books or by using the proof of the bank transaction.

If you get a receipt from the DGR in Melbourne, then you must ensure that it has the name of the charity or not-for-profit (NFP), its Australian business number and clarifies that the receipt is for the gift received from your organisation. The original copies can be scanned and stored electronically for claiming tax deductions.

What Type of Gifts Can Be Offered by A Small Business?

Australians are quite generous. According to a report the 2019 Australian Communities Trends Report, five out of six people in the country donate to charities. It is the same with businesses as they also have a sense of responsibility towards their community.

There are a variety of gifts that can be presented to NFPs for claiming tax deductions by a small business in Melbourne. Here is a list for your reference.

  • Cash Donations Above $2 – A small business in Melbourne can claim a tax deduction if it donates more than $2 to a DGR.

  • Property Bought Within the Past Year – You can claim tax deductions for donating property to DGR, but it must have been bought within the past 12 months.

  • Property Worth $5000 – Your bookkeeper can help in claiming deductions for donating a property that is valued at $5000. Here property encompasses material assets as well as rights and interests, such as shares.

  • Shares Below or Equal to $5000–You can take advantage of deductions if you donate shares of a public listed company, which are quoted on the Australian Securities Exchange. These shares must be worth $5000 or less and must have been bought by the donor within the past year.

  • Cultural Gifts – You can donate cultural gifts to galleries and museums for the same purpose.

  • Trading Stock – You can also donate the goods produced by your business or the raw materials required for manufacturing your products to DGRs. 

  • Heritage Gifts – Your bookkeeper will help you understand the concept of heritage gifts, which can be offered to a National Trust Organisation.

  • Bucket Donations – These are usually made for fundraising collections organised by an approved entity, such as contributions for a drought in Melbourne. The donation must be above $2, and you claim deductions for donations up to $10 without showing a receipt. However, for donations of more than $10, you will have to provide a receipt to claim the deduction.

Which Gifts Are Exempted from Claiming Deductions? 

The donations that bring back something in return for the donor are not eligible for deductions, such as raffle tickets, items which have an advertised price, the expense incurred during a fundraising dinner, contributions made for school buildings in return of a favour, membership fees, gifts for family and friends, etc.

Your bookkeeper can assist in differentiating between donations that are deductible and those which are not. Thus, you must consult them before going ahead with the payments.

 How to Make a Claim?

The bookkeeper will advise you on the right time to make a claim for tax deductions. Usually, the claims are made in the same year in which the charitable giving took place. However, it can be spread across a period of up to five financial years.

Your bookkeeper will make you do this if it is not possible to claim the complete amount in the same year or when the business is expected to earn a higher income in the consecutive years.

How to find a Good Charity?

Your bookkeeper can prove to be a helping hand if you are looking for an ideal charitable cause in your community. The Australian Charities and Not-for-Profits offer all the information about charities that are registered with them as well as others.

While looking for a legitimate charity in Melbourne, you must determine how they are utilising the funds generated through donations. You must be vigilant of fake charities that can dupe you.


If you are planning to donate to a charity as your corporate social responsibility, then you must take support from your bookkeeping company in Melbourne. They will help you to find the best DGR for the purpose and aid in getting tax deductions on the donated amount. 




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