The 10 things you should know about giving

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10 things you should know about giving July 28, 2008

By Margarete King

Giving to others helps society and can leave you, the giver,feeling good. But there is the added benefit that you can claim fora deduction against your tax  provided you make your donation toan organisation that meets the taxmans very specific requirements.

The festive season is over, and the orgy of gift giving andcollective overspending is done for another year. Thisoverindulgence is typically followed by New Year resolutions prompted by remorse  that are too strenuous for theirwell-intentioned makers to live up to.

May I suggest an alternative to this crazy cycle of boom and bust?Donations to certain organisations that work for the public goodare tax-deductible. If you are looking for tax relief, this is awin-win situation. And if you are looking for a New Yearsresolution that can easily be kept, you can resolve to support acharity or organisation working in a field that touches you whether it is teaching adults to read or supporting HIV-positiveorphans.

But it is important to know that you can claim back from the taxmanonly if you donate to an organisation that is registered with theSouth African Revenue Service (SARS) and that is entitled to issuea certificate for a tax deduction against your donation. Not allcharities, institutions and non-government organisations qualify.You could also donate to national, provincial or local government.

Section 18A of the Income Tax Act deals with the deduction ofdonations made to public benefit organisations (PBOs), so thesedeductions are sometimes called section 18A deductions.

1. How much you can claim
For the 2007/8 tax year, donations of up to 10 percent of yourtaxable net income (excluding any retirement fund lump sum benefit,and before deducting your allowable medical expenses) to anapproved PBO can be claimed as a deduction for tax purposes. In hisbudget of March 2007, Finance Minister Trevor Manuel doubled theallowable deduction from five percent, which applied to the 2006/7tax year.

The donation can be in cash or in kind. For example, a farmer cangive vegetables to a school feeding project.

SARS has different ways of valuing an in-kind donation, dependingon whether:

The asset forms part of your trading stock (as in the case of thefarmers vegetables);
You donate a business asset used in your trade (such as computers);or
Your donation is purchased, manufactured, erected, assembled,installed or constructed specifically for the purpose of beingdonated. (For example, you could help to build or repair a cr