Fair share for charities

Why would I want to do that? Let's face it, most of us have shares that we should have sold a year ago and which are now languishing in no man's land - not worth selling at current prices but at best a very long-term proposition indeed. An alternative may be to harness a little Christmas spirit and donate them to charity, where they can do some good for a worthy cause.

There's a benefit in it for you, too. In July last year, tax laws were amended to allow a full tax deduction for donations of ASX-listed securities worth $2 or more to registered charities, so getting rid of some shares should generate a tax saving as well. Under the previous rules there were limits on deductions for shares worth less than $5000.

Wouldn't it be easier to sell the shares and donate the cash? That's an option and if you just lobbed along to your favourite charity and offered them your unloved shares that's probably the suggestion it would make. But selling the shares will incur brokerage costs that will eat into the amount available to donate. That's fine if you want to make a big donation but many Australians have small share parcels that they would be happy to give away if the main beneficiary wasn't their broker.

That's where services have emerged to allow investors to donate their shares to charity without paying brokerage or commissions. One initiative, Sharity, was launched this month by genealogy and family history research company, Worthington Clark. The founder, Don Clark, says a lot of the company's work involved deceased estates - many of which included small parcels of shares. "They were so small you had to ask what they would do with them," he says. "We said there had to be an opportunity there."

How does it work? Clark says Sharity acts as a facilitator between donors and six charities - Westpac Life Saver Rescue Helicopter Service, Salvation Army, Sir Roden Cutler Charities, Surf Life Saving Australia, Cancer Council NSW and the Sir David Martin Foundation, which helps young people in crisis. Log on to the website at sharity.com.au, choose which charity you would like to receive your shares and download the appropriate share transfer form. This form is then returned to Sharity who will pass it on to the charity, which will send you a receipt. Clark says your shares are transferred directly to your nominated charity Sharity itself doesn't have any claim to ownership. The transfer is off-market, which means there is no brokerage, and Clark says Sharity receives no fees or financial benefits.

ShareGift Australia runs a similar service (sharegiftaustralia.org.au). However in this case ShareGift itself is a registered charity. You transfer your shares to ShareGift, which sells them for no fee on your behalf and then donates the proceeds to charity. The recipient charities are selected by ShareGift taking into account suggestions by donors but have included Unicef, Australian Red Cross Society, Mission Australia, the National Heart Foundation, Opera Australia, Sydney Dance Company, the Make-A-Wish Foundation and the Australian Conservation Foundation.

If I transfer shares through Sharity, what will the charities do with them? Clark says all six charities are comfortable accepting shares and some already have share portfolios. They may sell them at some time in the future, or keep them as an investment and receive the dividends. He says the charities may also work with public companies by promoting the service to small shareholders.

Who pays the capital gains tax if they sell them at a profit? For tax purposes, Clark says, you have disposed of your shares at the date on the share transfer form. That means you may have incurred a capital gain or loss on that date. Any future gains are enjoyed by the charity and of no consequence to you. Clark says when you transfer your shares you'll receive a receipt from the charity detailing the number of shares donated. But it is your responsibility to declare any capital gain in your tax return. He says the Tax Office requires you to use the market price on the date of the transfer form - so you'll need to keep a record of this date and the closing share price.