Tax-efficient ways to approach gifting and philanthropy

For many, the act of giving quietly says more about their values than their wealth ever could.While generosity is often driven by personal convictions, it does not exist in isolation from financial systems.

Tax-efficient gifting and philanthropy offer a way to contribute meaningfully while also supporting long-term financial goals. The structure behind how and when you give can shape both the reach and the effect of that contribution.

At First Financial, we help clients with holistic retirement planning that includes doing good with their wealth. Questions often turn to the mechanics, such as what options exist, how they differ and what each might mean in practice.

Charitable giving is typically motivated by personal beliefs, community ties or the emotional connection one has to a particular cause, but it also has a place in financial planning. In Australia, donations to Deductible Gift Recipients (DGRs) may be claimed as tax deductions if they meet certain criteria. These deductions reduce your taxable income, rather than returning the value of the donation itself.

If giving is something you genuinely want to do and you’re in a position to do it, structuring donations over time can lead to more lasting outcomes than one-off contributions. Philanthropic structures such as private ancillary funds (PAFs), charitable trusts and bequests offer flexibility in how and when funds are distributed.

They can also provide opportunities to involve family in the decision-making process and help create a legacy that extends well beyond a single act of giving.
Non-cash giving, such as donating shares, property or other assets, can involve different tax implications compared to cash donations. These may include considerations like capital gains tax, valuation requirements and timing of ownership transfer. While gifts of this kind can be highly effective, they usually require additional steps to assess their suitability and compliance.

Rules around charitable giving can vary widely, and even small details may affect how different options might work for your personal circumstances. Speak with your adviser to make sure your approach is clear, deliberate and right for the way you want to give.

As mentioned, there are several vehicles that support long-term planning and purpose, including private ancillary funds (PAF). A PAF is a type of charitable trust set up by individuals or families that allows donors to receive an immediate tax deduction while distributing grants to charities over time.

They must distribute at least 5% of their assets each year to eligible charities or DGRs, and they are regulated by the Australian Taxation Office (ATO).

Testamentary charitable gifts are another common option. These donations are specified in a person’s will and made after their death.

They might be a specific amount, a percentage of the estate or a residual bequest. While they are not eligible for a tax deduction during the donor’s lifetime, they can reduce the size of the estate for tax and asset distribution purposes.

If you own a business, that entity may make tax-deductible donations directly to DGR-endorsed charities as part of its operating expenses. Some organisations establish corporate foundations to manage ongoing charitable activity, typically aligned with business values or community investment strategies. Giving through a business structure can also enhance employee engagement, strengthen brand reputation and support broader social impact.

The decision of whether to give charitably—and then how to give, and to whom—is deeply personal. Most people base this decision on their beliefs, life experiences that have shaped them, or connections to particular causes. When you give to an enduring mission like education or health, or support research into an illness that has affected your own family, you’re not just offering monetary help. You’re building a lasting legacy.

Philanthropy can also be a family affair. Including loved ones in these decisions is a meaningful way to pass on your values, encourage open conversations and nurture a shared spirit of generosity.

In the context of multi-generational wealth, bringing children or future beneficiaries into the process early can help carry your charitable focus forward. Structures like family foundations or advisory boards can provide a more formal framework for involvement, if that feels appropriate.

Not every approach to giving is equal when it comes to time and effort. A one-off donation is simple, but structured giving, such as setting up a fund or foundation, can involve legal requirements, ongoing administration and reporting. Thinking about how much involvement you want day-to-day can help you choose a path that feels both sustainable and worthwhile.

Earlier, we discussed tax deductibility, but what exactly makes a donation tax-deductible in Australia? It must be made to an organisation with DGR status, and it must be a genuine gift with no material benefit received in return—this is why things like raffle tickets or fundraising dinners don’t qualify. Minimum amounts apply, usually $2, and proper documentation, such as receipts, must be kept for tax purposes.

While cash is the most common form of donation, you can also gift shares, property or other assets to eligible organisations. Again, these kinds of gifts may trigger capital gains tax (CGT), depending on the asset type and whether it has increased in value.

Donating pre-CGT assets or using provisions like gifting listed shares held for over 12 months may offer additional tax advantages, but it’s important to seek professional advice before proceeding with such endeavours.

The timing of a donation determines which financial year the deduction applies to, with anything made after 30 June falling into the next financial year. To claim charitable gifts on your tax return, it’s important to keep clear records, particularly if you’re giving through a trust, foundation or business. The  ATO offers specific guidance on how and when deductions can be claimed, and non-compliance may carry the risk of audit or penalties.

With EOFY 2025 fast approaching, now is a good time to reflect on your current and future plans for philanthropy and gifting.

While nothing beats the emotional reward of doing the right thing, if your plans are structured well, you might also receive a small financial thank you in the form of tax-effectiveness.

At First Financial, we can help incorporate your giving goals into a personalised financial plan that supports a confident retirement and ongoing contributions to the causes that matter to you.

To learn more about charitable giving, financial strategy or retirement planning, contact our team to speak with an experienced financial adviser.

Read more financial planning articles.