For taxpayers to be able to claim a tax deduction for a donation or gift to an organisation, the receiving entity must be endorsed as a “deductible gift recipient” (DGR), which can be checked on the ABN lookup website.
While this is the main condition imposed on claiming a deduction for donations, it is not the only factor the ATO considers. Also relevant is the nature of the donation and that it is a voluntary transfer of assets from donor to recipient, performed as an act of “disinterested generosity”. This last point is important, as the ATO stipulates that there should be no “material benefit” or advantage arising for the giver through the action of the gift or donation.
The outcome is that if a donating taxpayer receives something in exchange for their donation (such as a bandana or a pen), they cannot claim for the donation in their tax return — even if the receiving organisation is a DGR. Relevant material benefits and advantages listed by the ATO include:
raffle or art union tickets
items such as chocolates and pens
the cost of attending fundraising dinners, even if the cost exceeds the value of the dinner
payments to school building funds made, for example, as an alternative to an increase in school fees
payments where you have an understanding with the recipient that the payments will be used to provide a benefit to you.
The ATO recognises that a donor being given a lapel stick to acknowledge their gift, or being mentioned by name in an organisation’s newsletter for the same reason, is not deemed to be an “advantage” and will not deny the deduction. Where the donor is a corporate entity however, acknowledgement may be seen as a benefit and therefore render the donation ineligible for deduction.