Paying tax: Deduction for donations
Is the donation an unconditional gift?
A donation is an unconditional gift only if the giver receives nothing in return.
To work out the income tax and GST treatment of a donation you first need to know whether the donation is an unconditional gift, or if it's really a payment in exchange for something of value.
Claiming a deduction
|Income year||What companies can claim|
|Up to 2002||If a company (except a close company) makes a donation to a donee organisation it can claim a tax deduction for that donation. The maximum deduction it can claim is the greater of these amounts:
* Net income means gross income minus allowable deductions, but before any deduction for company gifts.
Note: Companies do not show the donations amount in the IR4 tax return.It is included in the net profit figure at keypoint 18B.
|2003 to 2008||
Note: The donation deduction amount is not entered on the tax return. It is included in the net profit figure.
Note: Companies need to show the donations amount in the IR4 tax return in the area provided.
GST and donations
Even if you're registered for GST you cannot claim GST input tax for any donations you make. GST is claimable on supplies purchased as part of your taxable activity, but your donation doesn't purchase any supplies.
However, if you're registered for GST and you purchase supplies from a donee organisation which is also registered for GST, the donee organisation will charge you GST on your purchase. In this situation you could claim a GST input tax, but the purchase wouldn't be a donation.
Date published: 16 Dec 2008