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16 Nov 2010 00:00
As it’s the season for giving, a lot of people are keen to make charitable donations. But what are the tax implications?
Billy Joubert, tax director at Deloitte, says that donations are tax deductible if they’re made to certain types of non-profit organisations.
To get the deduction, the donor would need to obtain what’s known as a section 18A certificate from the organisation concerned.
Organisations qualified to issue these certificates include so-called “public benefit organisations”, as set out in part II of the 9th Schedule to the Income Tax Act.
There are other types of organisations with Section 18A status, including entities conducting research (say, technical, scientific or industrial).
“In practice, donors should establish whether they might qualify for a deduction by asking the organisation concerned whether they have section 18A status,” says Joubert. “The amount the taxpayer must deduct is limited to 10% of taxable income (excluding certain lump sums). So taxpayers need to consider this limitation before committing to the deduction.”
A Smart Money tip—you need to follow up to obtain these certificates. Most NPOs have more pressing things to do than issue certificates the moment they’re requested and I can say from personal experience that it can take up to about six weeks to get these, in some instances. Watch your timing if you’re counting on those tax deductions for a particular tax year.Read more news, blogs, tips and Q&As in our Smart Money section. Post questions on the site for independent and researched information
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