Taxpayers looking to make a difference in their communities while optimising their tax positions can do so through donations to Section 18A (s18A) charities. These donations not only support crucial public benefit initiatives but also offer valuable tax deductions.
Under Section 18A of the Income Tax Act, individuals and businesses can make tax-deductible contributions to approved Public Benefit Organizations (PBOs). These organizations engage in activities that serve the public good, including education, healthcare, poverty alleviation and environmental conservation.
Many people don’t realise that their charitable donations can actually lower their taxable income, reducing the amount they owe to SARS. This is a great way to support meaningful causes while ensuring tax efficiency.
Key benefits of donating to s18a Charities
- Tax deductibility
Donations to approved s18A charities can be deducted from taxable income, up to a limit of 10% of the taxpayer’s taxable income for the year. This means donors can reduce their overall tax liability while contributing to critical social initiatives. - Maximising your financial position
With the rising cost of living, every bit of tax relief helps. By planning charitable contributions strategically, individuals and businesses can take full advantage of the tax deduction while making a lasting impact. - New SARS regulations and compliance
SARS has recently reinforced compliance measures for s18A donations. So it is important that taxpayers ensure that the charity they are supporting is properly registered with SARS and can issue valid s18A receipts as without this documentation, SARS may disallow the deduction. - Making a meaningful difference
Beyond the financial incentives, donating to an s18A charity allows individuals and corporations to contribute to causes they care about. Whether it’s funding scholarships, improving healthcare access or driving sustainability projects, these donations have a tangible effect on South African communities.
To claim the tax deduction, donors must retain an official Section 18A tax certificate issued by the receiving charity. This certificate must specify the donation amount and confirm the organisation’s tax-exempt status. SARS requires that these records be kept for at least five years in case of audit verification.
[Author: Michael Rushby]