Engaging in philanthropy can have significant advantages for individuals and businesses alike, and financial advisors should ensure their clients are aware of the perks, experts said at a philanthropy conference in Oakville, Ont. on Thursday.

In particular, there are some significant tax advantages to charitable giving, and advisors who don’t alert clients to the potential credits are not fulfilling their role, according to Brad Offman, vice-president of Mackenzie Investments.

“Charitable giving is probably the easiest way for Canadians to save money on their taxes,” said Offman. “Whether you’re an advisor, a lawyer or an accountant, if you’re not talking to your clients about the simplest way to save money on taxes, you are missing a very significant planning opportunity.”

In seeking tax benefits from a charitable donation, it is important to ensure the ‘donee’ is qualified, by checking the Canada Revenue Agency’s Charities Listings, according to Rosanne Rocchi, a partner with Miller Thomson LLP.

Typically, donors can claim part or all of the eligible amount of a donation up to a limit of 75% of their net income for the year. This limit could be upped to a full 100%, however, in instances where capital property is donated, Rocchi said.

New tax rules have also made gifts of publicly traded securities particularly appealing, since donors can transfer securities without paying capital gains taxes. As a result, the larger the capital gains on the donation, the greater the benefit to the donor, Rocchi said.

“That’s a significant benefit,” she said. “If you want to encourage your clients to give to charity, it costs them less to give appreciated securities.”

She added that the benefit applies to mutual funds, segregated funds and debt obligations as well.

When the rule was first implemented, it resulted in a huge influx of donations to charities, Rocchi said, but she added that given the recent market performance, the rule is less likely to appeal to donors this year.

Businesses can reap tax benefits from charitable giving too, by claiming donations on their T2 Corporation Income Tax Return.

But Rocchi warned that businesses should be cautious about giving making donations of products for silent auctions, particularly in Ontario. She said the Ontario Retail Sales Tax Act calls promotional distributions barter transactions, meaning that donated products are subject to retail sales tax by both the donor and the charity.

“Very few people are aware of this,” she said, encouraging advisors to ensure clients explore the tax implications of any donations they make.

Rocchi also emphasized that philanthropy, as part of a company’s corporate social responsibility efforts, can have widespread benefits for the business overall, such as building customer loyalty. Furthermore, corporate social responsibility is becoming an expectation of both large and small businesses, she said.

“We’re going into an era when corporate social responsibility is very important and it’s not going to be an option anymore for business to be charitable,” Rocchi said, “they’re going to be obliged to do so.”

IE