Payroll Giving is a simple and effective way for your company and its employees to support a number of worthy causes. Most people want to help but they may be uncertain that their donation will really make a difference. Payroll Giving is easy and direct. Participants can be confident that their contributions will be managed efficiently and will help to change lives.
Ten well-known and reputable charities in South Africa, covering various important needs and services, have come together to form The Giving Organisation to secure ongoing and sustainable sources of income. They wish to ensure that the beneficiaries they serve will continue to receive the benefits of their work even in difficult times.
Payroll Giving is a win/win solution for all involved. It is simple for employers to set up, employees can choose the amount they wish to give and are assured their gift will be helping in important areas of need, and the charities can plan ahead knowing that a certain income is assured on a regular basis.
Companies that participate will benefit by building a corporate culture of caring and responsibility within their organisations.
Section 18A of the Income Tax Act (Act 58 of 1962)
Section 18A(1) of the abovementioned Act provides for a deduction of donations in the form of cash or certain types of assets made to Public Benefit Organisations (PBOs) approved under section 30(1), provided that the donor is in possession of a valid receipt and the deduction does not exceed 10% of the donor’s taxable income.
This means that:
- Donations in general are liable to taxation at 20%.
- However, certain donations made to registered and approved organisations are exempt and claimable as tax deductions.
- The Giving Organisation is an approved institution for purposes of section 18(A) of the Income Tax Act, and donations to this institution are tax deductible in certain instances as noted above (ie registered and approved organisations).
- Therefore, unconditional donations to the TGO through Payroll Giving, qualify as a tax deductible expense, provided that the donation does not exceed 10% of the donor’s taxable income.
- In this regard the TGO in its capacity as recipient usually issues the necessary section 18(A) tax certificate annually.
- This document will serve as receipt and will entitle the donor to claim a deduction on the relevant tax return by submitting the tax certificate together with associated documentation to SARS before the annual tax submission deadline.