Direct giving
Direct giving is the most common and recognisable form of giving. The key to most forms of direct giving is that its implementation is simple. However, with that simplicity comes a trade-off with the ability to control what the amount given is used for.
Cash donations
The donation of cash can be effected in a number of different ways. These include:
- One-off donations to street appeals, or door to door
- Unsolicited donations to the donor's charity of choice
- Support of religious and education organisations.
Such donations are very simple, hassle free and in many instances can provide a limited tax benefit to the donor, in the form of a donation rebate or income tax deduction (refer to the tax effective giving section for further details). They help to provide immediate financial support to charitable organisations to assist with their costs. Due to the level of uncertainty associated with donations received, however, it is often difficult for organisations to plan how to use the funds in advance.
An alternative to this option is a regular planned giving, where a donor indicates in advance what will be given, or sets up an automatic payment so regular amounts are contributed.
Controlling what the donation is used for will also be difficult for the donor unless it is 'tagged' for a specific purpose. That is, if a donor gifts a sum of money to an organisation they may be able to state what they would like that money to be spent on, for example in relation to a specific project or acquiring certain assets. Placing such an obligation is only likely to be an option if the gift is of a material amount to the organisation.
Donations of income
Rather than donating cash, a person may choose to create an income stream to the charity by assigning income to the organisation. This could include interest, rent and dividends but cannot include personal services income.
In this way the benefit of the income accrues to the charity, but ownership and control of the asset remains with the donor. This option also removes the taxation liability in respect of that income as the income accrues to the tax-exempt charity and not the donor.
A further option on this theme is to make the charity a beneficiary of a discretionary family trust. The charity is simply entitled to benefit from the trust at the trustees discretion, being unable to force the trustees to make distributions. The advantage is that any amount of that year's income can be distributed as beneficiary income to the charity which is exempt from tax, whilst the asset is still own by the trust.
Income-earning assets
Taking the next step in direct giving, the donor may wish to gift the income-earning asset directly to the charity. Examples include shares, bonds, personal property etc. In this way not only is the value of the underlying asset transferred, but also the resulting income stream. This form of giving does not qualify for a tax rebate for the donor.
Funding in kind
Volunteer services
Along with cash, volunteer services are the most recognised and valuable form of direct giving to a charity. Donors of time need to consider how to best use their time and skills for the benefit of the organisation.
Pro bono Support
Pro bono support is usually referred to in relation to professional services. In situations where a charity would be required to incur costs to meet its obligations, professionals provide their services free of charge or at discounted rates in support of the charity. Examples include honorary audits, legal and tax advice, information technology support, printing, design etc.
Donated goods
A donor may also donate (or sell at a discounted rate) goods to their choice of charity. Examples include damaged or obsolete stock, office furniture, computers, etc. In this way the charity is able to reduce its overhead costs so that more funds can be applied towards its purpose.