Hey Lifehacker, I often shop at op shops to get the most bang for my buck. I’m filling in my tax return, and a mate says that all my op shop purchase can be claimed as charitable donations, regardless of what they were for. Is there any truth to that? Thanks, Opportunity Knocks
Picture: David Jackmanson
Dear OK,
Shopping at op shops is a fine way to save money, but it won’t give you any benefit when it comes to your tax return. The Australian Taxation Office (ATO) makes it very clear that any funds going to a charitable organisation can’t be claimed as a deduction if you receive anything substantial in return. here’s the relevant passage on the ATO site:
The gift must truly be a gift. A gift is voluntary transfer of money or property that you receive no material benefit or advantage for.
That applies whether what you receive is a T-shirt, a lottery ticket or a cheap piece of furniture. You can only claim a deduction if you have made a genuine donation and received nothing “material” in return. Shopping at an op shop absolutely doesn’t qualify.
Update for the commenters: the one exception is charity pins, which are not counted as a “material benefit” because it is “an item of insubstantial value that cannot be put to a use or is not marketable”. So you can claim for those.
I suspect your mate has been confused by tax laws in the US, where under some circumstances donations to charity shops can be offset against your taxable income (note this involves giving stuff to them, not purchasing from them). Regardless, it simply isn’t the case in Australia that op shop purchases will score you a tax deduction. Enjoy the savings (and the fact your expenditure will help others), and accept that cutting your tax isn’t one of the extra advantages this time around.
Cheers
Lifefacker
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Comments
16 responses to “Ask LH: Can I Claim A Tax Deduction For Op Shop Purchases?”
While I uspect you’re right in this instance, I question the rule being applied:
“The Australian Taxation Office (ATO) makes it very clear that any funds going to a charitable organisation can’t be claimed as a deduction if you receive anything in ”
eg I recently bought a few Legacy pins and the carboard they come on specifically says it is a receipt to be used as a tax deduction – even though you’re essentially buying a pin.
Not so sure about that, ANZAC day pins are tax deductible, therefore much of your argument is invalid.
Have updated to note the exemption for charity pins. Doesn’t affect the argument re acquiring goods at a charity shop in the slightest, though.
“A gift is voluntary transfer of money or property that you receive no material benefit or advantage for.”
A plastic mould on a pin with a value of about 5c would be pretty immaterial in the context of the donation given. How’s that invalid argument looking now?
Post discusses the pin issue. How’s that commenting without reading looking now?
Pretty sure @hoges was on your side here.
Bro… Chill out…
Post discusses the pin issue. How’s that commenting without reading looking now?
Angus, your comment (and the update in the article) wasn’t showing when I orginally posted. I guess that’s my bad.
And my comment was trying to clarify the position for @Lachlan and give you some support following his pithy contribution to the discussion. As @unashamedaussie pointed out, I’m on your side in this argument.
so does that mean all the stuff you don’t want, that you drop off at vinnies, lifeline, etc, do they become tax deductible? If so how would it be valued and what about the requirement for receipts when it’s over a certain amount?
No. It’s an option in the US (apparently), but not in Australia.
I know some charities will accept donations of old cars and they will provide a tax deductible receipt for the value of whatever they receive for it from the wrecker.
You need documentary evidence (usually a receipt) of your donation to make a claim, (although some exceptions applied during the Queensland floods).
If you can get a receipt for your donation from the relevant charity, with a dollar figure attached, there is no reason you can’t claim it. The donation does not have to be I cash, in fact under Australian tax law, goods in leau of cash can be treated as income or deductions.
There are rules relating to estimation of market value or original purchase price when treating goods this way.
I think the real issue is just that it is not common practice for charities I’m Australia to provide receipts for the donation of goods, whereas it is common in the US.
The charity needs to be a deductible gift recipient in either case.
The bottom line is that the Australian tax system is self-assessed, and if you believe that it is reasonable and lawful to make the claim and you are not deliberate trying to defraud the Australian government, you can make the claim. You must keep your evidence for that claim for 5 years and the ATO may request that evidence at any point during that time if they have reason to believe the claim is fraudulent. If you have made a false claim, you may be penalised, will have to pay back the refund you received relating to that donation, and interest on that amount from when the incorrect refund was paid to you.
Donation of personal items cant be claimed but business stock which has a value can sometimes be claimed. I.E. excess packaged food donated to a foodbank can in some cases be valued and claimed.
rather than claim as a charity, could you potentially not claim as a tax deduction based on the purchase of the item was for work related expenses? Ie. the purchase of a pair of pants to be used as a rag to clean up a paint spill for a rental house. wulla…deduction.
then ask yourself if claiming a deduction on 5 dollars was worth it (i guess it depends on how many ‘rags’ are required to clean that paint spill)
Gut reaction is ‘iffy’. If your total deductions are under $300, an audit is unlikely, but not impossible. Certainly wouldn’t work for clothes needed for a job; they only count with a specified uniform design.
A rag purchase das a legitimate business expense would be claimable under the relevant section, assuming someone is a sole trader or sub-contractor. It’s not a donation.
Protective or occupation specific clothing (like steel capped boots or a lab coat) is claimable even though it’s not a specific uniform, if it’s a requirement of your employment.
The ATO does not require you to keep receipts if the total of all deductions on your tax return is under $300, but it does expect you to be able to explain how you worked out the amounts you claimed. Once you go over that limit, you need documentary evidence for all claims, which is not always receipts, it can include things like log books or diary entries .
I know quite a few business people who buy items at charity auctions, e.g. autographed sporting paraphernalia, holidays, beauty treatments etc., who claim the full amount of their winning bid as a tax deduction.
I always suspected that it would not be a legitimate deduction. It seems to me that would be in a similar category to this question.
What amazes me is that the charity supplies a receipt for the “Donation”.
It could be they are committing fraud.
But it is possible to have a receipt that is partially a donation. A charity auction where you paid $2000 for an autographed photo that has an honest market value of $100, would represent a donation of $1900 and its possible to claim that, if you can get a receipt that breaks things down.
If the you then sells the item later on for $1500, that could be considered a capital gain of $1400 which you may have to pay tax on, under certain circumstances.