There are four key reasons why deductions for donations may be denied:
- The donation is to an organisation that is not endorsed by the ATO as a deductible gift recipient (DGR). You can confirm an organisation’s DGR status by checking ABN Lookup.
- Donations may not be tax deductible where the taxpayer receives or expects to receive a monetary or personal benefit or advantage in return. Common examples include raffles, fundraising chocolate sales etc.
- The lack of a receipt. Most organisations will usually issue you with a receipt, but they don't have to. The ATO accepts third-party receipts as evidence of a gift to a DGR if the receipt identifies the DGR and states the fact that the amount is a donation to the DGR. However, if a taxpayer makes one or more donations of $2 or more to fundraising such as bucket collections conducted by an approved organisation for natural disasters, they can claim a tax deduction of up to $10 for the total of those contributions without a receipt.
- The other issue that arises is sometimes people will seek to claim deductions for donations they intend to make in their will, or to claim deductions for workplace giving that has already reduced the amount of tax paid in each pay period.
It is important to ensure that the DGR status of the recipient is checked in these cases where you have made gifts to foreign charities or non-profit entities and where amounts have been contributed through online crowdfunding programs.