Taxing times for charitable giving

Posted on 11 Sep 2023

By Greg Thom, journalist, Institute of Community Directors Australia

The top end of town has helped push charitable donations across the nation to $4.4 billion but just 30% of us are giving, according to a new report.

The analysis of the latest Australian Tax Office [ATO] statistics by the Australian Centre for Philanthropy and Nonprofit Studies [ACPNS] revealed tax-deductible donations reached $4.39 billion in 2020-2021.

This represented an increase of 14.19% on the $3.85 billion tax-deductible donations made in 2019-2020.

Donors can only claim a tax deduction on donations made to organisations that are endorsed as a DGR by the Australian Charities and Not-for-profits Commission [ACNC].

There are 52 sub-categories of DGR endorsed charities, which comprise about 41.5% of all charities registered with the charities regulator.

The new figures are the latest in the annual analysis of income tax data by the ACPNS which looks at the amount and type of tax-deductible donations Australian taxpayers make and claim.

Key findings for the period 1 July 2020 to 30 June 2021 include:

Donations increased by 14.19% in 2020–21 following a drop the previous financial year.

The average tax-deductible donation made to DGRs and claimed as a tax-deduction was $1,047.27 – an 18% increase on 2019–20.

An estimated 4.19 million Australian taxpayers [27.71% of all taxpayers] claimed tax-deductible donations – the lowest on record.

Donations to DGR charities and claimed on tax represented an average 0.42% of individual income, up from 0.40% the previous year.

While declining levels of giving have been well documented of late, the study found the amount donated and claimed on tax by Australians to charities with DGR status “far exceeds” the rate of inflation.

One of the report’s authors, Emeritus Professor Myles McGregor-Lowndes of QUT Business School, said it was the third year in a row that less than 30% of taxpayers have claimed a tax-deductible donation.

“This is a trend also appearing in the USA, UK and Canada,” Professor McGregor-Lowndes said.

“However, the rise of mega-donors has meant that the total of donations claimed as tax deductions continues to rise overall, with taxpayers with a taxable income over $1 million accounting for 18.24% of the total amount donated in 2020–21.”

"The rise of mega-donors has meant that the total of donations claimed as tax deductions continues to rise overall, with taxpayers with a taxable income over $1 million accounting for 18.24% of the total amount donated in 2020–21.”

Emeritus Professor Myles McGregor-Lowndes, Australian Centre for Philanthropy and Nonprofit Studies [ACPNS].

Not all states give equally

The largest proportion of donations in 2020–21 came from New South Wales.

More than 1,324,397 NSW taxpayers claimed $1.39 billion in tax-deductible donations, 31.53% of the national total.

Victorians claimed the next largest proportion of donations [$1.38 billion] followed by Western Australia [$748].

The three states accounted for a combined 80% of all tax-deductible donations claimed.

At $1,729 Western Australian taxpayers claimed the largest average tax-deductible donation, followed by Victorians [$1,180] and ACT residents [$1,065] which were all higher than the national average of $1,047.27.

The view from the top end of town

Australians earning taxable income above $1 million a year donated and claimed less on their tax return than in previous years.

The top end of town claimed an average $88,256.35 35 in donations on their income tax [down 26.45% from $119,995.31 in 2019–20].

While this represents an average of 1.67 per cent of the nation’s highest earners taxable income and is above the 0.42 per cent national average, the total percentage of total donations for high income earners fell from 24.78% in 2019-2020 to 18.24%.

The ACPNS analysis also ranked DGR giving by postcode throughout the nation.

Residents in the well-heeled suburbs of Cottesloe and Peppermint Grove in Perth accounted for the highest total in claimed deductible gifts at $499,634,018.

Emeritus Professor Myles McGregor-Lowndes.

The figure accounted for more than 66 per cent of total DGR donations and claims in WA but was down 5.67% on last year’s total of $529,668,459.

The municipality was also responsible for the highest average tax-deducible donation at gift at $257,676 – almost five times higher than second ranked postcode of Fitzroy and Clifton Hill in Melbourne at $58,038.

Professor McGregor-Lowndes said he found the breakdown of DGR giving as a per centage of occupation income particularly interesting.

Financial investment advisors or managers ranked highest at 3.76 per cent followed by religious Leaders (1.88 per cent).

“Religious Leaders have ranked first in all but five recorded years (when they ranked second),” said Professor McGregor-Lowndes.

For the eleventh year in a row, police officers were the occupation with the highest percentage of DGR donating taxpayers [72.02%] followed by school principals [56.98%].