By Shane Wright
Australians making donations of as little as one cent will be able to claim a tax deduction under plans to encourage people to give millions of dollars more to the nation’s charities by rounding up their purchases.
Charities Minister Andrew Leigh will on Thursday reveal the plan to ditch the long-standing $2 threshold below which donations cannot be claimed on tax following a surge in the number of retailers asking customers to “round up” their purchases to the nearest dollar with a charitable contribution.
People will be able to claim a tax deduction by rounding-up their morning coffee under changes to donation law.Credit: Getty Images
In September alone, Woolworths customers rounded up their purchases by $770,000 which went to the Foodbank charity and in the United States, the round-up system raised an estimated $US749 million in 2022, according to the Engage for Good organisation.
But the abolition of the $2 threshold comes with a small catch: Australians will have to retain the receipts of their donations, no matter the size, so they can prove their donation to the tax office.
Leigh said the change, which will apply to donations made from July 1 this year if approved by the parliament, would be one way of helping the charity sector.
“This will support greater participation in philanthropy, by encouraging small donations including rounding up purchases at the point of sale in-store and online,” he said.
Australians are already allowed to claim up to $10 in cash donations to charity buckets without a receipt each year.
People and businesses donate around $13 billion a year to more than 32,000 registered charities. Despite total donations increasing over recent years, the proportion of people donating enough to qualify for a tax deduction is falling.
A Productivity Commission inquiry into the charitable sector earlier this year recommended the $2 threshold be abolished as a small way to encourage people to make donations.
The federal government introduced its tax-deductible charitable giving system in 1915 but the required donation was high £20 ($2500 in today’s dollars). It was reduced to £1 in 1927 and in 1966 when decimal currency was introduced it was set at $2 ($31.20 today).
It has not changed since.
Leigh will also announce plans to increase the amount so-called public and private ancillary funds must distribute to charities. There are more than 3200 of these funds including prominent private entities such as the Forrest Family Foundation and the Pratt Family Foundation.
Leigh said these funds provide a vital link between charities and donors, but they need to “fulfil their philanthropic purpose” in a more timely manner.
“The government recognises that prudent investment of assets held in giving funds increases the amount available for distribution to charities in the longer term. This will be balanced with the need to ensure the gifts that donors receive a tax benefit for, flow to charities sooner,” he said.
Under current law, these funds must distribute at least 4 per cent (public) or 5 per cent (private) of their assets each year.
Leigh said funds will have up to three years to meet the higher distribution rate, which the government has not yet determined.
Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.