When your business runs fundraising, you may be able to claim an income tax deduction. Goods and services tax (GST) may apply to some transactions.
Ensure you keep records of all donations made. This will help you prepare your tax return and report GST in your business activity statement (BAS).
Sales including GST
If you run a fundraising event that includes taxable sales, we require you to report these sales as usual.
Example 1: Running a fundraising event (proportion of sales donated)
Sierra runs a coffee shop and is registered for GST. To raise funds for bushfire recovery, Sierra decides to donate $2 from every $4 coffee sold in a week, to a deductible gift recipient (DGR) charity. At the end of the week her sales software shows that she sold 1,000 coffees. She donates $2,000 of the $4,000 of sales to the DGR entity and keeps the receipt. The business has an allowable deduction of $2,000 for the donation.
As the $4,000 of coffee sales are in the course of Sierra operating her business, these are taxable sales (subject to GST). Sierra must report the GST from the $4,000 of sales in her BAS as usual.
End of exampleIf you facilitate a fundraising event including the supply of a service, we require you to report these sales as usual.
Example 2: Running a fundraising event (facilitates event)
Jurgen is a yoga instructor planning a fundraiser event after a natural disaster. Jurgen is a sole trader registered for GST. His friend supplies a studio space for them to use free of charge. He promotes the event via social media and to his regular client email list. He asks for a contribution of $30 each to participate in the ‘Yoga and meditation for a cause’ class.
Clients and their friends attend the event, paying in cash and via EFTPOS on the day. The total raised is $990. The supply (of yoga instructing services) is within the course of Jurgen’s business so these are taxable sales (subject to GST). The GST collected, at 1/11th of the supply, is $90. Jurgen must report the GST from the sales in his BAS. He includes the $900 in his tax return as ordinary income.
As he donates $900 to a deductible gift recipient and receives a receipt, Jurgen has an allowable deduction for that donated amount.
End of exampleSales not including GST
If you supply a service that is not taxable to support a fundraising event, you do not need to report GST.
Example 3: Business contributing to a fundraising event outside of business enterprise
Vida runs a dance school and is registered for GST. Vida’s friends are planning a fundraiser yoga event. She agrees to them using one of the studios for the event, without charge.
Vida does not advertise the event and does not receive any benefits relating to the event. As the business does not receive any benefit, the supply made by Vida (of the space) is not a taxable sale. There will be no GST to report in the BAS.
End of exampleClaiming income tax deductions and GST credits
If you donate trading stock it may be tax deductible if:
- you are donating the trading stock outside the ordinary course of your business
- have not claimed an income tax deduction for the forced disposal or death of livestock.
Trading stock is anything produced, manufactured, acquired or purchased for the purpose of manufacture, sale or exchange in your business. Live stock is also a trading stock.
If you donate trading stock with GST attached to it for fundraising, you may be able to apply for a GST credit when you submit your BAS.
See also:
When you fundraise, there are situations when GST applies.