By Louw Rabie*
17 December 2014
With the provisional tax deadline on the horizon and in this season of giving, its valuable for companies – and individuals – to keep these four things in mind when donating to charity, especially when you’re hoping to benefit from the related tax breaks.
1. IT’S NOT (ONLY) ABOUT THE TAX BENEFIT!
You’d be naïve to look at the tax benefit from charitable donations as the main reason to donate, as you’d typically be giving away more than what you’d be getting back from tax benefits. At Sygnia, we like to get involved in entities that our staff are involved in – we don’t believe in simply giving a blank cheque to a random entity that we found on the internet. Most often our staff are actively involved in these charities, whether they’re places of care for people living with Aids, rural education initiatives or entities that work with animals, or at the very least, they have connections with these organisations. They’re encouraged to spend time at these places and to get to know them. This helps us equip our staff members to help other people to make a difference in the world.
2. MAKE IT COUNT
Beyond being actively involved, we prefer to give more to make it count more. We won’t give R1000 to a charity, for example, as this won’t really make a difference. We’ll rather reduce the number of places we support, and support them with a sizeable amount. Our social committee looks at and considers these annually. But we’re not dogmatic about our process, we continually get requests from our passionate staff and we try and hop in and get involved with these projects and donations as much as possible.
3. MAKE SURE THE PAPERWORK IS IN ORDER
It’s essential that you are donating to a qualifying organisation, otherwise you won’t be able to claim the tax deduction. These charities will have had to register with the SARS’ Tax Exemption Unit to allow them to issue the receipt as required by Section 18A of the Income Tax Act. We find this process to be seamless. Simply put: any organisation which has its paperwork in order is legitimate (try and sort the registered ones from the hundreds of organisations trying to save the rhino and stop poaching without this, for example!). This obviously also protects SARS from people claiming bogus deductions. Charities are acutely aware of what they would need to do and they absolutely know the benefits of providing that information.
4. ROLLING OVER THE EXCESS
Donations can be deducted from your taxable income, with the limit being 10% of the total in the cases of both natural persons (individuals) and companies or trusts. From 1 March 2014, however, you’re able to roll over any donations beyond the limit in a given year to the following year. In these cases, the amounts carried forward will be considered donations paid in that subsequent year. This incentivises companies and individuals to give more right now – not a bad thing at all!
*Chief Financial Officer, Sygnia Asset Management
Louw joined the Finance Team at Sygnia Asset Management just six years ago. He began his professional career as a trainee account at LDP Inc. In his three year contract he did auditing, tax planning and consulting services to small to medium size companies stretching over a wide range of sectors. After completing his articles and qualifying as a CA(SA) he was approached by Investec Trust (Guernsey) to form part of their offshore finance team.
