Australians making donations of as little as one cent will be able to claim a tax deduction under plans to encourage people to give millions of dollars more to the nation’s charities by rounding up their purchases.

Charities Minister Andrew Leigh will on Thursday reveal the plan to ditch the long-standing $2 threshold below which donations cannot be claimed on tax following a surge in the number of retailers asking customers to “round up” their purchases to the nearest dollar with a charitable contribution.

In September alone, Woolworths customers rounded up their purchases by $770,000 which went to the Foodbank charity and in the United States, the round-up system raised an estimated $US749 million in 2022, according to the Engage for Good organisation.

But the abolition of the $2 threshold comes with a small catch: Australians will have to retain the receipts of their donations, no matter the size, so they can prove their donation to the tax office.

Leigh said the change, which will apply to donations made from July 1 this year if approved by the parliament, would be one way of helping the charity sector.

“This will support greater participation in philanthropy, by encouraging small donations including rounding up purchases at the point of sale in-store and online,” he said.

Australians are already allowed to claim up to $10 in cash donations to charity buckets without a receipt each year.

People and businesses donate around $13 billion a year to more than 32,000 registered charities. Despite total donations increasing over recent years, the proportion of people donating enough to qualify for a tax deduction is falling.