Business Donations & Tax: What Business Owners Need to Know

Making a donation from your business is a great way to give back to the community — and yes, in many cases, it can reduce your tax bill too.

But not every donation is tax-deductible, and the ATO has strict rules on what qualifies. Whether you're a sole trader, company, trust, or partnership, here's what you need to know about the tax implications of business donations in Australia.

What Counts as a Tax-Deductible Donation?

To claim a deduction for a donation, your business must meet specific criteria set by the Australian Taxation Office (ATO).

1. The Organisation Must Be a Deductible Gift Recipient (DGR)

Only donations to organisations registered as Deductible Gift Recipients (DGRs) are tax-deductible. You can check if an organisation has DGR status using the ABN Lookup — just look for the DGR endorsement.

2. It Must Be a Genuine Gift

A deductible gift is:

• Voluntary
• Given without the expectation of material benefit (e.g. advertising, goods or services)
• A monetary donation (of $2 or more) or an eligible item of property

Example: Giving $500 to a registered charity like the Red Cross is deductible. Sponsoring a local event and receiving a banner with your business name in return? That’s not a donation. However it could possibly be classified as a deductible business advertising expense.

How Much Can You Deduct?

There’s no fixed limit on how much your business can donate, but:

• Donations can only be claimed up to the business’s taxable income
• Excess amounts can be carried forward for up to five years

You’ll need a valid tax receipt from the DGR, showing:

• The organisation’s name and ABN
• The amount donated
• A statement that the organisation is a DGR

What Doesn't Qualify as a Tax-Deductible Gift?

Some common donations may not be tax-deductible:

Remember: donations of goods or property may be deductible, but you’ll need a proper valuation and documentation. Speak to your tax agent before claiming these.

Donations vs Sponsorship: Know the ATO Difference

Many small businesses support local causes or events, but it’s crucial to distinguish between a donation and a sponsorship.

If your business receives promotional benefits (e.g. logo placement, signage, mentions), it’s a sponsorship — and should be recorded as a business expense, not a donation.

EOFY Tip: Make Donations Before 30 June

To claim a donation for the current financial year, it must be made before 30 June.

Many businesses use this opportunity to:

• Support causes that align with their values
• Reduce taxable income
• Strengthen community and brand goodwill

Just make sure your donation ticks the ATO boxes.

Recordkeeping: What You’ll Need

The ATO requires businesses to keep records of:

• Donation receipts from DGRs
• The date and amount of the donation
• The purpose and nature of the donation
• Any acknowledgments or promotional benefits received

Records must be kept for at least 5 years in case of review or audit.

Final Thoughts from Us

Making donations from your business is a meaningful way to give back — and when structured correctly, it can also reduce your tax bill. But the rules are specific, and misclassifying a gift or sponsorship can lead to errors in your return.

Before donating, ask:

• Is the recipient a registered DGR?
• Am I receiving anything in return?
• Do I have proper documentation?
• Should this be classified as a business expense instead?

Thinking of making a donation this financial year?

We can help you check the DGR status, determine the best way to claim it, and ensure it's recorded correctly in your accounts.

Get in touch with your tax agent today to discuss