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A Government Match Better than KiwiSaver

01 Mar 2019

Ever heard of a charity where some famous or rich person says that they’ll match your donation? Usually, if you give a dollar to the charity, they’ll match your donation so the charity gets two dollars.

One group even did a study on the effect of this type of charity matching and found it increased the probability that someone donates by 22%.

Perhaps you didn’t know that the government already has a matching program.  If you give money to a charity then the government provides you with a tax credit, you can then continually reinvest the tax credits, which means the government effectively matches your donation by 49 cents on the dollar.

You might ask, how is that possible. The highest tax bracket is only 33%. Surely you can’t get more than 33% back on your donation?  You can, if you direct all the tax savings back to the charity.

For example, if you donate $100,000 to a registered charity and you’re on the 33% tax bracket, you may be eligible to get back $33,000 in the form of a tax credit. Now let’s say that you decided to donate those tax savings to the charity. You may get another tax refund of $10,890. But what if you gave that money to the charity as well? You can see how this would work.

Of course, all this assumes that you have the taxable income to make the deduction.

At Polson Higgs Wealth Management, we encourage our clients to be generous with their extra money while they are still living to take advantage of the government tax credits.  If you decide to wait to donate until you die, the government won’t match anything. That’s a big waste for the charity you support.

The point being, philanthropy can be even more effective through planning.  If you’re interested in philanthropy or are planning to give any money away when you pass on, have a chat to one of us. We might be able to increase the value of your contributions.

Jared, Shiree, Lisa and Rhodes