The Income Tax Exemption of Charities and the Tax Deductibility of Charitable Donations: The United States and Australia Compared

Abstract

This article analyses and compares the income tax exemption for charities and the tax deductibility of donations to charities in the United States of America and Australia both from a fiscal and social perspective. It commences with an explanation of not‑for-profit status and the development of the legal concept of charity in both countries. It then compares the different approaches in Australia and the US to this legal concept and the rise of the income tax exemption and its significance both financially and socially. The authors then discuss the development and implementation of tax deductibility of donations in both countries. The article concludes with an evaluation of specific and significant differences between the US and Australia which are the taxation of unrelated business income of charities and the different approaches to tax deductibility of donations.