Community Sheds (such as men’s sheds and women’s sheds) are a unique take on the common Australian backyard shed. However, instead of the shed being a place of isolation, a community shed brings people together. Community sheds are commonly a place where people come together in a safe, friendly and inclusive environment to work on projects at their own pace in the company of others. Community sheds aim to improve the health and wellbeing of Australians through addressing social isolation and advancing mental health.
While community sheds have been eligible for registration as a charity for some years, it has been difficult for many to demonstrate they satisfy the criteria to be a type of charity that is permitted to receive tax deductible gifts. Fortunately, things just became a whole lot easier!
From 1 October 2020, a new category of deductible gift recipient (DGR) for community sheds will be available. The new category is listed on the DGR table under Item 1.1.9 – Community sheds.
What is a community shed?
To qualify as a community shed for the purposes of endorsement as a DGR by the Australian Taxation Office (ATO) a community shed must:
- have an active ABN;
- be located in Australia;
- be registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC);
- have the characteristics of a community shed, being a public institution that:
- has its dominant purposes as advancing mental health and preventing or relieving social isolation;
- advances its purposes principally by:
- providing a physical location; and
- supporting individuals to work on projects or undertake other activities in the company of others at that location
- has either:
- open membership; or
- membership open to persons of a particular gender or with Indigenous heritage or both; and
- have a DGR winding up and revocation clause.
If your organisation has the characteristics of a community shed, then it may wish to explore endorsement as a DGR under this category.
What is the benefit of DGR endorsement?
If endorsed as a DGR your organisation will be entitled to receive gifts which are deductible from the donor’s income tax but only if they are genuine gifts (i.e. freely given for no material reward). The practical benefit of this will depend on how the organisation engages with potential donors and its intended revenue streams. For example, if the organisation receives a cash donation from an individual of $2 or more with ‘no strings attached’ in terms of how the funds are to be used, the donor would likely be eligible for a tax-deductible receipt.
The answer to the question about ‘what a gift is’ will depend on the circumstances and is sometimes rather technical and complex. You can learn more about tax deductible gifts and tax deductible contributions by visiting the ATO website.
What if my organisation already has DGR endorsement under another category?
It is not uncommon for an organisation’s purpose to change over time. With the ACNC undertaking a review of public benevolent institutions this year, it may be a good time to re-assess whether your current subtype is the most appropriate one for your organisation. For example, public benevolent institutions or health promotion charities may find that the new category of community shed better aligns with their current and future aims. If you are unsure, the ACNC has provided a helpful self-assessment tool to assist your review.
Following such a review, your organisation may find:
- its current endorsement is still appropriate and no change is needed; or
- community shed registration is a better fit for your organisation.
If you are already endorsed as a DGR under the category of public benevolent institution or health promotion charity but you want to change this to community shed, you can apply to change its charity subtype via the ACNC portal. This will also change the tax concessions your organisation is entitled to, including meaning your organisation will no longer be eligible for the fringe benefits tax (FBT) exemption.
How does my organisation become a community shed?
If your organisation is already a registered charity with the ACNC it can apply directly to the ATO by completing the application for endorsement as a deductible gift recipient.
If your organisation is not a registered charity with the ACNC, it can apply for DGR endorsement as part of its application to register as a charity.
How can we help?
If you want to know more about the new community shed category or would like assistance in applying for endorsement of your organisation, please get in touch with our Charities + Social Sector Group.