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The $2 tax deduction and why it made my student self give 3

Fundraising | Celina Ribeiro | 8 Sep 2010

Australia didn't top the recent World Giving Index just because it's a nation of top mates. Tax breaks are key, says Aussie Celina Ribeiro.

There are certain things that, as an Australian, I can generally speak about with some authority: coffee; the relative benefits of extreme heat versus endless grey drear; and long haul air travel.

And now, giving.

The CAF World Giving Index, released this morning, shows my countrymen, and those across the Tasman, as the most ‘giving’ in the world – giving of time, cash and just generally helping out other people.

You can say, as Don Willesee, chief exec of CAF Australia rightly did, that Australia has a tradition of ‘mateship’, a social-democratic tradition that has manifested itself throughout history in commitments to egalitarianism, via voting rights for women, workers rights and the like.

Or you could say, it’s because every donation above $2 is tax deductable.

I’m going with a little bit from column A, a fair bit from column B.

As an impoverished student living in Sydney, I was a regular donor to an international aid charity. I gave $20 a month at a time when I was sometimes eating damper (a rustic yeast-free version of bread which is akin to a savoury scone) in lieu of dinner. What made me give $20 a month, and not the UK’s £2 a month, is the fact that at the end of every financial year I received a letter from my charity, thanking me for my commitment and recording my total annual donation. I then used this letter to fill in my personal tax form et voila: Savings via philanthropy!  

Personal tax benefits do motivate individuals of every tax bracket to give more money. I doubt there are many Australians collecting their raffle tickets or receipts from when they drop a couple of bucks into street collectors buckets (they do carry receipt books for this purpose), but the line ‘any donation above $2 is tax deductible’ is a constant soft up-sell and one which works very, very well.

This is clearly not something the British government has capacity to do now, particularly not with all the noise about gift aid, but it does make you wonder. When charities are not making the most out of their own tax benefit by claiming more gift aid, why would a donor be incentivised by the mechanism?

Australia exports a lot of crap to the rest of the world – coal, Fosters, sheepskin slippers which Brits wrongly take for outdoor footwear – but the $2 tax rebate is one thing which the rest of the world should really take a serious look at.

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Directory: Charities Aid Foundation