More Claim Tax Deductable Donations

The number of individual Australians donating to charities and claiming a tax deduction is again on the rise according to the latest research from Queensland University of Technology.

In 2002-03 Australians donated and claimed as tax-deductible donations some $959.40 million (compared to $913.74 million for the previous income year) which constitutes an increase of $45.66 million (or 5.0%) from the previous year.

By comparison, Australian taxpayers also claimed $1.009 billion (or 4.9%) in tax agent fees and $1.4585 billion (or 7.06%) in bank fees, interest and dividend deductions!

Each year QUT’s Centre of Philanthropy and Nonprofit Studies (CPNS) analyses statistics on tax-deductible donations made by Australians in their individual income tax returns to Deductible Gift Recipients (DGRs).

The research is based on the amount and type of tax-deductible donations made by Australian taxpayers to DGRs for the period 1 July2002 to 30 June 2003.

This information has been extracted mainly from the Australian Taxation Office’s publication Taxation Statistics 2002-2003.1 The 2003 report is the latest report that has been made publicly available.

The research found that by using a base year of 1978-79, the actual total tax-deductible donations made by Australian taxpayers is far exceeding the inflation-adjusted total tax-deductible donation as measured by the Consumer Price Index (CPI).

And the average tax-deductible donation made and claimed by Australian taxpayers to DGRs is increasing. In 2003 the figure was $257.64 (compared to $246.82 the previous income year).

In 2002-03, 3,723,776 Australian taxpayers (or 34.92%) made and claimed tax-deductible donations. That is approximately one in three Australian taxpayers donated monies to DGRs and claimed tax deductions for these amounts for that year. This percentage has been increasing slightly over the past eleven years and is at its highest level since 1992-93.

In 2002-03, 1,959,458 males made and claimed tax-deductible donations to DGRs of $580.13 million. This represents 60.5% of the total tax-deductible donations made and claimed.

A total of 1,764,318 females made and claimed tax-deductible donations to DGRs totalling $379.27 million (representing 39.5% of the total).

The average tax-deductible donation by Australian male taxpayers to DGRs in was $296.07 compared to $214.97 for Australian females.

A total of 1,250,152 taxpayers in New South Wales claimed tax-deductible donations to DGRs of $403 million. This amount represented almost 42% of the national total.

The next largest donor-state was Victoria whose taxpayers claimed $252 million, representing 26% of the national total.

Queensland taxpayers claimed donations totalling $126 million. This represented 13% of the national total. Together, these three states accounted for 81% of total tax-deductible donations made to DGRs in 2002-03.

NSW taxpayers made and claimed the largest average tax-deductible donation to DGRs of $322.50 compared to the national average of $257.64.

Australian Capital Territory taxpayers made the next highest average tax-deductible donation to DGRs with $306.17, followed by Victoria with an average tax-deductible donation of $248.08. Queensland taxpayers made and claimed an average tax-deductible donation in 2003 of $191.06.

The research shows that the more one earns, the more one claims as a tax-deductible donation. Whilst the average tax-deductible donation was $257 in 2003, donating taxpayers earning over $1 million per year claimed an average of $40,867 in tax-deductible donations. This represents 1.4% of their taxable income, compared to the national average of 0.26%. 64% of taxpayers in this tax bracket make and claim a tax-deductible deductible donation (national average 35%).

Research leader, Professor Myles McGregor-Lowndes says that over the past decade, tax-deductible donations have been steadily increasing by an average of 6% per annum.

In 2001, total tax-deductible giving increased by 16.74% over the previous income year. Furthermore, in 2002 and 2003, giving levels remained high.

McGregor-Lowndes says this begs the question: What was the impetus for the dramatic increase in tax-deductible giving in 2001 and beyond?

He says the incentives announced by the Prime Minister to encourage philanthropy in recent years appear to come to fruition from 2001.

He says one measure was to expand the type of gift that may be tax deductible to include property valued by the Commissioner of Taxation at more than $5,000.

Previously, gifts were restricted to being in the form of cash, property purchased within 12 months or trading stock.

He says another measure was an amendment to create Prescribed Private Funds (PPFs) along the lines of US Family Foundations.

A prescribed private fund is a fund established by a will or trust instrument with Deductible Gift Recipient (DGR) status (that is, gifts to it are deductible to the donor). Previously, such funds were required to seek and receive donations from the public and be strictly controlled by members of the public.

By 30 June 2003, the number of PPFs was 132 and by 17 June 2004, this number stood at 228.

He says inn the year 2002-03 two taxation incentives may also explain the increase – streamlined employee payroll giving and conservation covenants over land tax deductions.