Comments on: Can I get a tax deduction from building a website for a charity?

Question: Can I get a tax deduction from building a website for a charity?

Eastgate — Fri, 09 Jan 2009 00:50:45 -0800

Building a website for a charity in Australia. Can I get any tax deductions from this? Does it make a difference if I charge them or if I do it for free?

I'm a freelance web developer in Melbourne, Australia, and I've been asked by a charity if I will build a website for them. I'm wondering whether I can get any tax deductions or any other tax benefits from doing this. I'm also wondering whether anything changes if I do it for free or charge them. Anyone know about how this works?

By: Netzapper

Netzapper — Fri, 09 Jan 2009 01:37:22 -0800

I don't know about Australia, but I know that in most states in the US it's essentially impossible to donate professional services and get any sort of tax break on it.

Ask your accountant.

By: ryanbryan

ryanbryan — Fri, 09 Jan 2009 02:00:09 -0800

Pretty sure you can't, and this from the ATO would appear to confirm.

By: b33j

b33j — Fri, 09 Jan 2009 02:04:12 -0800

Tax deductable donations must be money or property. Look here. I suppose it's possible you could invoice them, have them pay you, and then donate that money back, but then you would have to note that money as income as well. I'm not an accountant or anything useful like that.

By: Netzapper

Netzapper — Fri, 09 Jan 2009 03:51:43 -0800

I suppose it's possible you could invoice them, have them pay you, and then donate that money back

Here in the States, at a Federal level, that would essentially cancel out to zero. It would be equivalent both in cash-in-hand and tax liability to just doing the work for free in the first place.

Actually, as I think about it... it would be worse than zero. I'd have to pay excise tax on the gross income.

By: Medieval Maven

Medieval Maven — Fri, 09 Jan 2009 07:52:38 -0800

As I understand it, if you are a pro and you do work for a charity at a reduced rate, you can get some sort of tax benefit, but they have to give you a recpt for that in-kind work. I could be totally wrong here, though, so check with an Australian tax pro.

By: andraste

andraste — Fri, 09 Jan 2009 17:06:08 -0800

I work in the philanthropic sector in Australia, and no, an individual person can't donate their time and skills to a charity and obtain a tax deduction for it. It has to be money or property, and if property it has to be valued professionally.

I imagine the reasoning behind this is largely the difficulty of valuing professional services and of ensuring that people aren't overestimating their own worth; I can imagine it becoming a massive tax dodge, especially for some highly paid professionals who can charge thousands for a few hours work. It would be very easy to abuse a system which allowed this - who's to say how much your services are worth? The potential loss in tax revenue would be huge.

If you do assist them pro bono, the potential benefit is that they are happy with your work and promote it. They thank you in their annual report or newsletter; their donors see that, and you're on their radar if they need a designer. People see their website and your logo/credit on it, and they think you must be a decent, ethical person (or company) who supports a charity they approve of, and more business comes your way. It is very difficult to measure, though.

By: AnnaRat

AnnaRat — Fri, 09 Jan 2009 18:36:18 -0800

If you actually are employed by them, you may be able to benefit from the generous salary packaging options which non-profit organisations have, which essentially amounts to a tax reduction. But not all organisations have this packaging option, and they would have to employ you, rather than merely contract you.

By: Eastgate

Eastgate — Fri, 09 Jan 2009 19:30:42 -0800

Thanks guys, I think that answers my question. I'll probably just give them a discount rate and that should work out.

By: h00py

h00py — Sat, 10 Jan 2009 03:54:14 -0800

In Australia, with some exceptions, tax deductions are available if they directly relate to income that you are declaring. If, as a free-lance web designer, you design a website for a charity and you are paid for doing that and therefore declaring it as income you should be able to claim your associated costs. I don't know what those associated costs might be because I know nothing about web design, but if there are any then those would be your tax deduction (blank disks, additional software bought, etc). IANAA (but I was a tax consultant for a while) so you should talk to your own. If there are costs associated with doing this job and you didn't charge the charity you wouldn't be able to claim them. On the other hand, if you charge them in order to claim those deductions you'll have to pay tax on your profit.

As far as the work itself being a tax-deductible donation, b33j and the others above have got it right.

By: h00py

h00py — Sat, 10 Jan 2009 03:58:19 -0800

... are available for your expenses if they directly relate...

(Sigh, tax talk makes my eyes glaze over.)

By: h00py

h00py — Sat, 10 Jan 2009 03:59:45 -0800

And I have the feeling you probably knew all that already, anyway.