2/3 of Donations are Not Claimed as a Tax Deduction    August 1998

Australia’s first survey comparing data on individual giving levels with Taxation Statistics has revealed a low level of claims for tax deductible donations. Of $1.8bn in individual donations to charity only 1/3 are claimed as a tax deduction. Similarly, only 1/3 of taxpayers make claims for tax deductible donations even though 3/4 of the adult population actually make donations. This means over 5 million Australians make a donation without making a claim in their tax return. The survey was conducted by Givewell, a business which conducts research on charities and provides services to business, professionals and individuals to promote informed giving. Full text of the survey follows : Total Giving Levels The most recent data on individual giving levels are for the 1997 year. The recently released Survey on Giving conducted for the Australian NonProfit Data Project by ABS Population Survey Monitor calculated total individual adult donations (excluding those for religion – which are not deductible) at $1.755bn. This reinforced the December 1997 Australians and their Money survey of 2000 adult Australians which estimated total annual charitable donations of $1.76bn. As a proportion of the adult population the Survey on Giving found that 71% (aged over 15) made donations compared to 77% (aged over 18: 8.38m persons) in Australians and their Money. Tax Office Statistics While the latest tax office statistics are for the 1995-96 year they reveal a smooth trend in the level of claim for donations in the four years since 1992-93. This enabled us to make reliable estimates for the 1996-97 year. Tax Office Statistics on Gifts by Individuals The table below has now been updated following publication of the 1997 Tax Office Statistics. Year 1992-93 1993-94 1994-95 1995-96 1996-97 Gifts claimed $439m $471m $495m $528m $541m Taxpayers making claims 3.13m 3.16m 3.17m 3.20m 3.15m Total Taxpayers 9.27m 9.39m 9.62m 9.85m 9.9m Based on Tax Office Statistics for the 1996-97 year gifts claimed represent 31% of total donations. Similarly, the proportion of taxpayers claiming deductions has been 32-33% of taxpayers lodging returns over the last few years. This analysis shows that approximately 2/3 of total individual donations are not claimed as a tax deduction. We also estimate that 5.23m persons made gifts to charity without claiming a tax deduction (ie. 8.38m minus 3.15m). Why the Shortfall? There are no available statistics which can be brought together to explain this shortfall. That said, Givewell has identified a number of contributory factors: No receipt is issued and the taxpayer forgets the donation. Lost receipts omitted from the tax return. Some taxpayers do not believe in claiming a tax benefit for a gift. Many forms of gifting are not tax deductible. This includes raffles, merchandising, tickets to functions and gifting assets owned for more than 12 months. Some charitable organisations do not have tax deductibility status. While bequests and religious donations have been excluded from this analysis it should be noted that they too are not tax deductible. Commentary The results of this analysis bears on two widely canvassed arguments about philanthropy and the taxation system. The first is that there are insufficient incentives for gifting in the tax system. While incentives are certainly less than those which exist in the USA this analysis suggests that existing incentives are being under-utilised. The second argument is that the government should do more to finance the charitable sector. This analysis suggests the government is getting off lightly on the level of “co-contribution” by way of a tax deduction for individual donors. Government support can be indirectly increased by emphasising tax deductible gifts and encouraging donors to give more by looking at the cost of donations on an after tax basis. Givewell acknowledges that individual donor preferences support a proportion of donations which cannot be tax deductible (eg. a trend towards ‘something for something’ giving). However, the overall result that only 1/3 of donations are claimed suggests to us that more attention to securing eligible tax benefits can benefit donors and charities alike. It also represents an appropriate way to achieve more government support without recourse to policy or legal review.