When is a donation tax deductible?

Donating to a worthy cause allows you to make a difference to someone else’s life.

You may feel even better about donating if your donation qualifies for a tax deduction, but not all donations to charities qualify.

In order to qualify for tax deduction for a donation, you need to donate to a public benefit organisation (PBO) that is registered with the South African Revenue Service (SARS) as a section 18A organisation.

How donating can be tax deductible

All PBOs must be registered with the South African Revenue Service (SARS) in order to benefit from certain tax concessions.

PBOs that rely heavily on public funding and meet certain criteria can register with SARS as section 18A organisations under Income Tax legislation. This legislation then provides an incentive to taxpayers who donate to these organisations by allowing taxpayers to deduct their donation from their taxable income.

Your donations to a Section 18A PBO up to 10 percent of your taxable income are tax deductible. The PBO will need to supply you with a Section 18A tax certificate so you can claim this deduction from your taxable income.

If you donate more than 10 percent of your taxable income in any tax year, the excess can be carried forward and deducted from your taxable income in the following tax year.

Tax-deductible donations

Several types of donations to a Section 18A registered PBO can be tax deductible:

• Cash donations. The PBO issues a tax certificate for the amount donated.
  
  
• Donations in kind, including food, equipment, clothing and other goods. The PBO will provide a tax certificate based on the estimated value of the donation.
  
  
• Payroll donations by employees to a PBO. The employer deducts the regular donation amount from the employee’s salary and pays it over to the PBO. The PBO issues a tax certificate to the employee, and the employer must take the donation into account when deducting monthly Pay As You Earn (PAYE) tax from the employee’s salary.

Donations that are excluded

Giving your time or skills free of charge.

Paying to attend a fundraising event such as a golf day or dinner.

Buying raffle or other fundraising tickets.

Providing rent-free premises to a PBO, which may include water and electricity.

The value of goods, such as art or memorabilia, donated to be auctioned for fundraising.

Settling debt on behalf of a PBO.

The payment of school fees, admission fees, or school levies to a school that is PBO. If the school is one for special needs, parents may be entitled to a medical tax credit for expenses related to a disability.

Proving that you made a donation

Firstly, ensure that the organisation you are donating to is registered in terms of Section 18A. SARS has a list of all approved organisations.

Make your donation during the current year of assessment – the tax year runs from March 1 to February 28 or 29 the following year.

Provide your details to the organisation to which you have made a donation and ask it to provide you with a tax certificate indicating the amount of the donation, which you claim on your tax return. SARS may request a copy of the certificate as part of a request for supporting documents for your tax return.