Australians are generous by nature, and as soon as there is a worthwhile cause, like the current drought or the bushfires, it’s not uncommon for someone in the office to suggest an activity designed for raising funds. But there are other ways your business can give too.
By Paul Rattray
Australians love to give. Statistics on our philanthropic behaviour estimate that about 90% of us regularly give to causes we believe in. And we tend to give pretty generously. In the 2016-2016 financial year, the average tax deductible donation by an individual was $667.
While most companies want to make sure they have avenues available for their people to be able support causes they’re passionate about, making sure that you account for the funds, and enable donors to claim tax deductions where applicable, is paramount. Because not following these rules and regulations can get you into trouble with the ATO.
In the workplace, people and companies tend to give in one or more of the following ways.
These are a formal, structured programmes which offer a simple way for people to regularly donate. But they can be a little onerous to manage which is why they are not all that common in small business.
In its most basic form, a workplace giving programme allows an employee to choose an amount to be deducted from their net salary, and donated to a particular charity. There are no limits on the minimum or maximum donation, and the donation does not affect gross income, super guarantee payments or fringe benefits.
But here’s where it can get complicated.
Charitable contributions can be made in two ways: via donation (as above) with the employer choosing to reduce the amount of tax deducted from the employee’s pay each pay period to account for the donation. (The employee still claims a tax deduction in their tax return).
The employer can also decide not to reduce the amount of tax withheld from the employee each pay period. (The employee claims a tax deduction for the amount donated at the end of the financial year.) This information must be provided in the payment summary.
The other option for making a charitable contribution is via salary sacrificing. When this occurs, an employee agrees to have a portion of their salary donated to a charity in return for the employer providing them with benefits of a similar value (like reducing their salary by $15,000 but receiving a work car). The employee is not entitled to claim a tax deduction in this case, because it is the employer who is making the donation. But, the employee benefits because their gross salary is reduced by the salary sacrificed amount and the employee pays income tax on the reduced salary.
If you’re running an event for clients or staff and decide to make it a fundraising event, then there are a number of considerations, most notably, around which contributions qualify for a tax deduction and which don’t.
Generally speaking, any donation over $2 needs to be receipted so the donor can claim if they choose to, unless they have received something in return for that donation, for example a raffle ticket, or entry to the event.
Remember that fundraising has its own set of guidelines, which is regulated under state legislation. It’s worth checking on these. In New South Wales, they are overseen by the Office of Fair Trading.
This is the most straight forward way to make a charitable donation. The company simply gives an amount of money to a charitable cause, receives a receipt for the money and can then make a claim for a deduction at tax time.
If your team likes to host ‘gold coin’ days – for example, everyone is invited to wear the colour blue, or a silly tie and make a gold coin donation. In these instances, it is simply easiest to add up the total of employee contributions and submit it to the charity as a ‘corporate donation’.
Because each team member received the right to participate in the group activity with their gold coin, they are not entitled to a receipt to make a claim. However, if they wish to donate more than the stated gold coin, for example ten dollars, they are eligible for the receipt to claim at tax time, to the value of whatever their excess gold coin value is .
Fundraising days can be a great team building opportunity, so they should not be discounted. It’s important to note though that you do need to consider fundraising regulations and also tax implications, and this means they are a little extra effort for the accounts team.
If you have a situation where the team wants to fundraise for a team member or former team member who has been diagnosed with a terminal illness or suffered a personal catastrophe, just remember that it’s highly unlikely that any donations would be tax deductible in this instance, unless the person has what’s called DGR status, (Deductible Gift Recipient status). Most reputable charitable organisations have this status – it’s a legal requirement for any organisation which relies on income from donations and fundraising efforts, but it pays to check, and you can do this online.
Donating to a friend or colleague as in the example above then, needs to be understood by those contributing as just a simple act of generosity and kindness, without a tax benefit.
Sponsorship agreements are another way to support charitable organisatons that you have a good brand synergy with. These agreements can range from a simple logo presence along with a cash donation to more complex arrangements that involve mentoring, volunteering, co-hosting events, and so on.
The best advice in this instance is to make sure that your not-for-profit partner not only DGR status, but the ability to deliver on what they promise. Always get agreements in writing in the form of contracts signed by both parties, and looked over by a lawyer. Typically, because the arrangement will be in the form of ‘exchange of services’ it’s not likely to carry any tax deductions, but get specialist advice. Irrespective of this, it’s important to put a value on your contribution.
Volunteering is also an ‘exchange’ of services, in this case your team is giving their time of their skills for free and it can be given a value that’s worth noting for your marketing and PR. But, remember too, that if you have staff volunteering on the premises of the charity itself, then you need to check that your people will covered by the appropriate insurances. You team is your responsibility in these situations, in much the same way as if they were attending a conference.
There’s been a lot of emphasis in recent years on the benefits of sustainable and responsible business practices – not the least of which is that companies which operate with a philosophy of giving back are highly valued by staff, suppliers, and customers.
Whatever your business decides to do to support others less fortunate or get behind initiatives in the local community, just treat it as you would any other business opportunity. Make sure t’s aligned with your business, get professional advice, and make sure all agreements are in writing.