30/09/2021

In this article we take a deeper dive into what deductible gift recipient (DGR) endorsement is, why it is beneficial and provide a brief overview of common types of DGRs to help you determine whether your organisation might be eligible.

What is DGR endorsement and what does it mean for your organisation?

A DGR is a not-for-profit which has been endorsed as such by the Australian Taxation Office and can, because of this endorsement, receive tax deductible gifts. Where gifts are tax deductible, donors can deduct the amount of their gift from their taxable income when they lodge their income tax return. Notably only genuine gifts (i.e. gifts freely given for no material reward) of $2 or more are tax deductible. Deductible gifts can be monetary gifts or gift of property (including financial assets such as shares).

DGR endorsement can be appealing to an entity as it can help it attract donations or gifts due to the donor being able to claim the donation as a deduction when filing their personal income tax return. DGR endorsement is also beneficial because DGRs are eligible to receive funds from a number of philanthropic bodies (such as ancillary funds) that are restricted to only donating to DGRs.

Despite these advantages, not all entities are eligible to be DGRs. Instead, generally only entities which fit within a DGR category (and satisfy any other eligibility criteria) can be DGRs. In limited circumstances, an entity may be able to obtain DGR endorsement by specific listing in the Income Tax Assessment Act 1997 (Cth) (Income Tax Act) which we discuss further below.

Types of DGRs

There are two types of DGR endorsement:

  1. Whole DGR endorsement – where the whole organisation is endorsed as a DGR (and therefore donations to the organisation are deductible); or
  2. Part DGR endorsement – where part of the organisation (e.g. a fund, authority or institution an organisation owns or includes) is endorsed as a DGR (and therefore only donations to that part of the organisation are deductible).

Requirements for DGR endorsement

To be endorsed as a DGR, an organisation must:

  • be a not-for-profit;
  • have an Australian Business Number (ABN);
  • fit into a specific DGR category/type (listed below) and satisfy any specific eligibility criteria for that DGR type (Note: This does not apply where DGR endorsement is sought through specific listing);
  • be established and operated in Australia;
  • have specific rules for transferring surplus gifts and deductible contributions if the organisation is wound up or its DGR endorsement is revoked; and
  • in certain cases, set up a public fund or gift fund.

Additionally, as discussed in our recent article about DGR reforms, unless an exemption applies, all non-government entities (including funds, authorities and institutions) seeking to obtain or maintain DGR endorsement, must also be either:

  • registered with the Australian Charities and Not-for-profits Commission (ACNC); or
  • operated by a charity registered with the ACNC.

Ancillary funds and organisations specifically listed by name in the Income Tax Act are exempt from these new requirements.

What are the DGR categories?

There are 51 DGR categories and most have their own additional eligibility criteria. While a full breakdown of the types of DGRs can be accessed through the ATO’s DGR table, below we provide an overview of some of the most common DGRs.

DGR Category

General overview

Registered Health Promotion Charity

 

A registered health promotion charity is a charity whose principal purpose is to promote the prevention or the control of diseases in human beings, which includes physical and mental illnesses. This is a narrower requirement than that of the charity subtype of ‘advancing health’. You can read more in our article on health promotion charities.

Community Sheds

 

Community sheds with DGR endorsement are public institutions located in Australia with the dominant purposes of advancing mental health and preventing or relieving social isolation. They must provide a physical location where they support individuals to undertake activities, or work on projects, in the company of others.

 

A community shed can either have open membership or membership open to persons of a particular gender or with Indigenous heritage.

 

You can read more in our previous article on community sheds and DGR eligibility.

Approved Research Institute

 

An approved research institute is a DGR category open to Commonwealth Scientific and Industrial Research Organisations (CSIRO) as well as approved universities, colleges, institutions, associations or organisations.

 

To be eligible, the entity must be approved as an institution, association or organisation for undertaking scientific research which is, or may prove to be, of value to Australia, in writing by one of the following approving authorities:

  • CSIRO;
  • National Health and Medical Research Council; or
  • Department of Education, Skills and Employment's Research and Higher Education Infrastructure Branch.

An approved research institute will be recognised as such if it is undertaking scientific research which is, or may prove to be, of value to Australia, and has a suitably qualified research committee that evaluates the merits of proposed research programs and determines how any research funds held are applied these research purposes.

Registered Public Benevolent Institution

A registered public benevolent institution has the main purpose of providing benevolent relief to people in need. Benevolent relief includes activities for the relief of poverty, distress, sickness, disability, destitution, suffering, misfortune or helplessness. The degree of need must be:

  • significant enough to arouse compassion in people in the community;
  • beyond the suffering experienced as part of ordinary life; and
  • directed towards helping people who are recognisably in need of benevolence).

Public Fund for Persons in Necessitous Circumstances

A public fund for persons in necessitous circumstances is established and maintained for the purpose of relieving the necessitous circumstances of one or more individuals who are in Australia. Necessitous circumstances means circumstances involving poverty or not having enough financial resources to have a modest standard of living in Australia.

Public Fund on the Register of Harm Prevention Charities

A public fund on the Register of Harm Prevention Charities must be operated by a charity that conducts activities to promote the prevention or the control of behaviour harmful or abusive to human beings such as emotional abuse, sexual abuse, physical abuse, suicide, self-harm, substance abuse and harmful gambling.

Australian Disaster Relief Fund

An Australian Disaster Relief Fund is a fund established and maintained solely for providing money for the relief of people in Australia in distress as a result of a disaster that:

  • has been declared by a treasury minister as a disaster;
  • has been declared to be a disaster by, or with the approval of, a minister of a state or territory under the law of the state or territory; or
  • gives rise to a declaration of a state of emergency by, or with the approval of, a minister of a state or territory under the law of the state or territory.

 

The disaster must have been developed rapidly and resulted in widespread damage or physical suffering, and includes fires, earthquakes, floods, storms, cyclones, typhoons and hurricanes, landslides, tsunamis, plagues, terrorist attacks, and epidemics.

 

Disaster relief can include assistance to re-establish a community, providing emergency shelter, providing health care and food supplies, trauma counselling, and repairing and reconstructing infrastructure.

 

Australian disaster relief funds are entitled to receive tax deductible gifts for two years from the date specified in a treasury minister's declaration, the date of the disaster or emergency specified in a declaration, or the date of that declaration.

Animal Welfare Charity

Animal welfare charities are institutions which provide one of both of the following as a principal activity:

  • short-term direct care to animals that have been lost or mistreated or are without owners;
  • rehabilitation of orphaned, sick or injured animals that have been lost or mistreated or are without owners.

 

Examples of short-term care include: veterinary services for injuries and illnesses, the recovery, first aid and transport of injured animals, washing and grooming lost animals and riding them of pests, and feeding and sheltering animals in the short term while their owners are contacted or new homes are found.

 

Rehabilitation activities can include: training orphaned animals to interact safely with humans, providing care to return to health, and training injured animals to walk and eat again.

 

If animals are not recovering from injury or sickness and are not in need of rehabilitation, ongoing care for them will not qualify.

 

The following activities will not qualify as principal animal welfare activities: lobbying and public education activities, breeding and showing activities, and training veterinarians, veterinary nurses and animal carers.

 

Natures reserves, animals sanctuaries and zoos will not qualify under this DGR category.

 

Animal welfare charities activities should not be restricted to only providing short-term care or rehabilitation to native wildlife and organisations that solely focus on native wildlife may be categorised as environmental organisations (see below).

Charitable Services Institution

Charitable services institutions similarly to public benevolent institutions, provide benevolent relief to people in need but also undertake health promotion and/or harm prevention activities. This includes promoting the prevention or control of diseases in human beings and promoting prevention or control of behaviours that are harmful or abusive to human beings.

Public fund on the Register of Environmental Organisations

Organisations with public funds listed on the Register of Environmental Organisations have the principal purpose of protecting and enhancing the natural environment or a significant aspect of it, providing information or education, or carrying out research about the natural environment or a significant aspect of it. Examples include organisations which focus on wildlife and rainforest conservation.

Overseas Aid Fund

An overseas aid fund is a public fund that is established by an organisation declared by the Minister for Foreign Affairs under the Overseas Aid Gift Deduction Scheme. To be eligible the public fund must provide relief to people in a country declared to be a developing country.

Public fund on the Register of Cultural Organisations

Entities listed on the Register of Cultural Organisations are those which have a principal purpose of promoting one or more of the following specified cultural forms: literature, music, a performing art, a visual art, a craft, design, film, video, television, radio, community arts, arts or languages of Indigenous persons, or movable cultural heritage.

 

Promotion of art and culture can include directly creating or producing, presenting or exhibiting, education (including through research and publishing), providing training and preserving works of art or items of movable cultural heritage.

What if your organisation does not fit within a DGR category?

Where an organisation does not fit into any of the DGR categories above, it can apply to be specifically listed in the Income Tax Act by writing to the Commonwealth Treasurer. Organisations are only listed by name in exceptional circumstances.

How can we help?

If you think your organisation is eligible for DGR endorsement, or if you would like more information about DGR endorsement, please get in touch with our specialist Charities + Social Sector lawyers.

 

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