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

January 9, 2009 12:50 AM

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?

posted by Eastgate to Work & Money (11 answers total)

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.
posted by Netzapper at 1:37 AM on January 9, 2009

Pretty sure you can't, and this from the ATO would appear to confirm.
posted by ryanbryan at 2:00 AM on January 9, 2009

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.
posted by b33j at 2:04 AM on January 9, 2009

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.
posted by Netzapper at 3:51 AM on January 9, 2009

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.
posted by Medieval Maven at 7:52 AM on January 9, 2009

Best answer: 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.
posted by andraste at 5:06 PM on January 9, 2009

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.
posted by AnnaRat at 6:36 PM on January 9, 2009

Response by poster: Thanks guys, I think that answers my question. I'll probably just give them a discount rate and that should work out.
posted by Eastgate at 7:30 PM on January 9, 2009

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.
posted by h00py at 3:54 AM on January 10, 2009

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

(Sigh, tax talk makes my eyes glaze over.)
posted by h00py at 3:58 AM on January 10, 2009

And I have the feeling you probably knew all that already, anyway.
posted by h00py at 3:59 AM on January 10, 2009