For charitable and not-for-profit organisations interested in understanding whether they are eligible for endorsement by the Australian Taxation Office (ATO) as a deductible gift recipient (DGR), one option to consider is an approved research institute.
What is an approved research institute?
An approved research institute is an entity approved as an institution, association or organisation for undertaking scientific research.
To be an ARI, an entity must:
- be a Government authority, registered charity or an organisation that is part of a Government authority or registered charity;
- be undertaking scientific research which is, or may prove to be, of value to Australia;
- openly publish the results of their research, in the scientific and technical press;
- have a suitably qualified research committee to evaluate the merits of proposed research programs and determine how any research funds held are applied to research purposes;
- have a research fund account and the administrative structure capable of, and responsible for, the management of tax deductible gifts to ensure they are used exclusively for scientific research;
- have an appropriate dissolution clause in its governing document (e.g. constitution) that ensures in the event of winding up or upon revocation of endorsement as a DGR, any remaining surplus is to be transferred to an institute with similar objects and entitled to receive tax-deductible gifts; and
- be approved as an approved research institute by one of the following approving authorities:
- the Commonwealth Scientific and Industrial Research Organisation (CSIRO);
- National Health and Medical Research Council (NHMRC); or
- Department of Education, Skills and Employment's Research and Higher Education Infrastructure Branch.
In this article we answer some common questions about ARIs and outline further detail around the requirements to be an ARI.
What is ‘scientific research’?
The ATO recognises scientific research as any activity in the fields of natural or applied science for the extension of knowledge. This can include:
- Natural science: the study of material phenomena of animate and inanimate things, e.g. subjects such as physics, chemistry, biology, astronomy;
- Applied science: the application of a branch of science (not just natural science) for the solution of practical problems; and
- Extension of knowledge: an extension of or addition to the sum total of knowledge (not an extension of the field over which knowledge already known is spread). This would not include activities relating to the dissemination of existing knowledge such as the provision of scholarships for students, the organisation of conferences, and the publication of information.
ARIs are generally required to conduct their own research. However, an approved research institute can sub-contract out a portion of their research to appropriately qualified researchers or research bodies, as long as the ARI:
- retains control over the research being conducted by the contractor (e.g. the capacity to decide on major changes of direction in research activities, the ability to stop an unproductive line of research, the scope to follow up or otherwise on an unexpected result, and the power to end a project);
- retains effective ownership of the results of the research (certain rights of publication for contracted researchers will not exclude this); and
- identifies the research work which will be contracted out.
What are the requirements of the research committee?
In order to gain approved research institute status, an entity must have a suitably qualified research committee which must take sole responsibility for ensuring the research undertaken is scientific in nature and that it is, or may prove to be, of value to Australia. The committee is required to have effective control over funds disbursed within the entity's research fund account.
An approved research institute research committee must be made up of at least five people who are nominated on the basis of their proven ability to direct a research program (as evidenced by their academic qualifications and professional appointments). A majority of people on the research committee must be appropriately qualified in the field of research undertaken by the approved research institute or have appropriate experience in reviewing such research. All research committee members must give their consent to join the committee and have consent to join from all other committee members. The approving authority must also approve of prospective research committee members, prior to them joining the research committee.
What are the research fund account requirements?
ARIs are required to operate a separate research fund account into which tax deductible gifts and contributions are paid into. Funds within the research fund account must be used exclusively for scientific research. Research fund accounts are subject to an independent annual audit.
What if I want to know more about approved research institutes?
For more information on ARIs you can read the ATO’s guidelines for approved research institute applicants.
How can we help?
If you believe your organisation is eligible for registration as an ARI, or if you would like help setting up an ARI, please get in touch with our specialist Charities + Social Sector lawyers.