Understanding the Tax Benefit of Giving Charity – Section 18A
The Ramson Cross Foundation is a registered Public Benefit Organisation (PBO) authorised to issue Section 18A tax certificates (receipts) which allow taxpayers to claim a tax deduction for donations made to it. A taxpayer making a bona fide donation in cash or of property in kind to a section 18A-approved organisation, is entitled to a deduction from taxable income if the donation is supported by the necessary section 18A receipt issued by the PBO. Additionally, bequests or accruals from the estates of deceased persons in favour of the Public Benefit Organisation are exempt from the payment of Estate Duty. Donations in fixed property, shares and in trading stock can be made under certain conditions.
S18A Status
The South African Government has recognised that certain organisations are financially dependent upon the generosity of the public and to encourage that generosity, have provided a tax deduction for certain donations made by taxpayers.
The eligibility to issue tax deductible receipts is dependent on section 18A approval granted by the Tax Exemption Unit of SARS, and is restricted to specific approved organisations which use the donations to fund specific approved Public Benefit Activities listed in Part II of the Ninth Schedule.
The Ramson Cross Trust has obtained S18A status.
A taxpayer making a donation in cash or of property in kind to The Ramson Cross Trust, is entitled to a deduction from taxable income, if the donation is supported by the necessary section 18A receipt issued by the organization.
The amount of donations which may qualify for a tax deduction may be limited.
How much can I claim as a tax deduction?
Taxpayers (including individuals, companies, cc’s and trusts) can deduct from their income, the amount they donate to the Ramson Cross Trust, up to the value of 10% of their income. Any excess above the 10% is carried forward to the next tax year as a deduction.
Example
| Taxable Income 2019 | R1,000,000 | |
|---|---|---|
| Donation to Ramson Cross | R120,000 | |
| Amount Deductible | (R1mil x 10%) | (R 100,000) |
| Carried forward to next year | R 20,000 | |
| Final Taxable Income | R 900,000 |
How much money will I save making a donation to the Ramson Cross Trust as opposed to another non S18A institution?
Example
| Donation to Ramson Cross | Donation to a non S18A institution | |
|---|---|---|
| Taxable Income 2019 | R1,000,000 | R1,000,000 |
| Donation | R 100,000 | R100,000 |
| Taxation (2019) | R 271,973 | R312,973 |
| Saving (Potential Tax Refund*) | R 41,000 | |
| * if PAYE or Provisional Tax Paid |