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News & Press: Opinion

Deductible donations

01 March 2013   (1 Comments)
Posted by: Herman van Dyk
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By Michael Stein (Friday Page)

Section18A of the Income Tax Act allows a deduction from the taxable income of a taxpayer of so much of the sum of any bona fide donations by the taxpayer in cash or of property made in kind, that is actually paid or transferred during the year of assessment. To qualify for the deduction the donation must be made to a qualifying body.

While there is a special rule for donations made by unit trusts, the deduction allowed to other taxpayers in any year of assessment is limited to 10% of the taxable income (excluding any retirement fund lump sum benefit and retirement fund lump sum withdrawal benefit) of the taxpayer as calculated before allowing the deduction itself and the deduction allowed under s18 of the Act for medical expenses.

One of the unfortunate aspects of this deduction under the current law is that the taxpayer may not carry forward to the next year of assessment the amount by which the donations made during a year of assessment exceed the 10% limit.

But the Budget of 27 February 2013 addresses this issue. This is what the document ‘Revenue trends and tax proposals’ says on the subject:

Public-benefit organisations

Donations to PBOs working in the areas of welfare and humanitarian activities, health care, education, conservation, environmental protection, animal welfare, and land and housing are deductible up to 10 per cent of taxable income in the year the donation is made. Donations in excess of this figure cannot be carried forward, which reportedly discourages large donations. Government proposes to allow donations in excess of 10 per cent of taxable income in any given year to be rolled over as allowable deductions in subsequent years. Also under consideration are rules governing the amount of funding that must be distributed where PBOs provide funding to other PBOs.’ [Footnote omitted.]

If implemented, the carry-forward of the deduction would be a welcome development.


Christopher C. Backeberg says...
Posted 27 March 2013
Welcome review., welcome development! However, i have noticed that SARS has intensified audits on Donations, whereas any public participation project, which does not specifically issue proper receipts, can and does become a 'disallowable' expense. I refer in particular to contributions to the likes of 'casual day' ! Comment ?


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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