Give money to tax office or charity: your choice! By Denis Kristanda
In Australia, we know that all donation over $2 to charity(*) is tax deductible. We probably hear this one a lot from TV, radio, newspaper, banner, etc… But what that’s really mean?
Like it or not, we will need to pay tax. Say you earn $50,000 this financial year, so you will be in 30% tax bracket and approximately total of $9,600 (if there is no deduction or offset) will be given to the tax office. (Well, technically the tax office already holds the money since the employer withheld and submit the amount already, but it’s only theirs once we submit the tax return)
Then now, it is your choice whether you let the tax office have it all -or- let some of those tax money given to your chosen charity organization. I would believe that most of us will prefer some of the money is given to a charity. We do think so too. But how we make it happen ?
How It Works
We simply make a direct donation to the charity organization(*) first. Make sure you get the receipt. So, if we donate $1,000. Since you’re on 30% bracket, $300 of that $9600 tax money will be given to the charity through you (You give this $300 first to the charity, then the tax office will reimburse the money). In other words, while you’re giving away $1000, you only need to pay out of pocket $700 because you get back the $300 from the tax return.
If you’re on the higher tax bracket, say 40% or 45%, then there should more motivation for you to donate as the tax office will return $400 or $450 - respectively for every $1000 of your donation.
Why we do it?
Yes, of course, we still need to pay our part and we need to pay it first upfront. But without this, none of your tax money will be directly used for the good cause of your favorite charity organization. Beside that, you need to remember the 6 basic human needs. Like it or not, our soul also need to contribute. It will make you feel complete and satisfied as human being. Try it !
Conclusion
Now, it’s clear that it’s your decision - yours only - that decides whether: you want to give some of the tax money to your charity or let the tax office have all the money !! You’re in control - nobody else !
(*) The charity organization need to be included in what so-called deductible gift recipient (DGR). Check this by going to http://abr.business.gov.au/ and click link on ‘Deductible Gift Recipients’ on the left menu.
Posted in category: Taxation on 30 Mar 2008 | 2 Comments »