Government scraps $2 minimum on tax-deductible donations
The change aims to boost charity donations, but Philanthropy Australia has warned that “minor tweaks” will not be enough.
The government will abolish the $2 minimum threshold for tax-deductible donations, encouraging more Australians to give to charity and meet its goal of doubling philanthropy by 2030.
Charities Minister Andrew Leigh said the reform meant spare change donated at checkouts in-store and online through rounding up would be tax deductible.
“The Albanese government is making it easier for Australians to support causes close to their hearts by reforming the tax deductibility of donations and how philanthropic funds operate,” he said.
The $2 threshold has been in place since 1927.
The total impact of point-of-sale donations in Australia is unclear, but a recent initiative between Woolworths and charity Foodbank raised $770,000 in one month.
In the US, charities raised $749 million in 2022, according to Engage for Good.
The reform, announced on Thursday, enacts recommendations from a Productivity Commission inquiry into philanthropy.
The inquiry was launched to review the rules around charitable giving to achieve the government’s goal of doubling philanthropy by 2030.
Charity donations and bequests totalled $13.9 billion in 2022, according to an annual report from the Australian Charities and Not-for-profits Commission.
In addition to removing the minimum gift requirement, Leigh announced measures to increase flexibility for charitable funds, renamed “giving funds” to reflect their role in facilitating donations.
He said the government would also consult on higher annual distribution rates and allowing funds to smooth distributions over three years, potentially supporting large-scale charitable projects and funding capital works.
Philanthropy Australia welcomed the removal of the $2 threshold but said more “significant” changes would be needed to fix the system and grow giving.
“Minor tweaks are simply playing around the edges of a giving system that is unnecessarily complex and puts the Australian philanthropic sector at a distinct disadvantage compared to other countries in terms of providing effective support to charities,” chief executive Maree Sidey said.
Sidey wanted to see a commitment to a comprehensive overhaul of the deductible gifts recipient system – a key reform proposed by the Productivity Commission, which called the regime “poorly designed” and “overly complex”.
“The case for fixing the DGR system is clear, and Philanthropy Australia will keep advocating for this reform to be urgently prioritised,” she said.
In the absence of DGR reform, she was “reluctant” to support increasing the minimum distribution rate for private and ancillary funds.
"Many of our members have been raising concerns about a potential increase in the minimum distribution for ancillary funds.”
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