Australian disaster relief funds (ADRFs) are a type of fund eligible to be endorsed as a deductible gift recipient (DGR) and receive tax deductible gifts. For the next iteration of our DGR series, we explore the characteristics and requirements of this DGR category.

What is DGR endorsement?

Organisations (or funds) with DGR endorsement are permitted to receive gifts of money or property from donors and issue a tax deductible receipt.

DGR endorsement is appealing to many organisations. This is because DGR endorsement allows a donor to claim most donation as a deduction when filing personal income tax return and can therefore help attract more donations.

DGR endorsement is also beneficial because DGRs are eligible to receive funds from a number of philanthropic bodies (such as ancillary funds) which are restricted to only donating to DGRs.

What is an ADRF?

An ADRF is a public fund established and maintained solely for providing money for the relief of people in Australia in distress as a result of a disaster. This includes relief by way of assistance to re-establish a community. In addition, an ADRF must either be:

• a registered charity or operated by a registered charity; or
• an Australian government agency or operated by an Australian government agency.

These requirements are in addition to meeting the general DGR requirements, outlined below.

Public funds established and maintained by a registered public benevolent institution, may also be eligible for endorsement as an ADRF.

The requirements for ADRFs are set out in item 4.1.5 in section 30-45 of the Income Tax Assessment Act 1997 (Cth) (ITAA).

What kind of relief can an ADRF fund provide?

Under the ATO ADRF Guidance, disaster relief will vary with the nature of the disaster and can cover a broad range of activities, including the provision of:

• emergency shelter;
• health care and food supplies; and
• relief for people through:
  • preventing further danger from the disaster;
  • providing amenities, resources and facilities for use in relieving the distress;
  • providing trauma counselling; and
  • repairing and reconstructing infrastructure.

Examples of relief provided through prevention initiatives, suggested by the ATO are:

• building retaining structures to prevent landslides following the loss of vegetation from a cyclone;
• preventing the spread of disease after a flood; and
• securing structures to limit damage if aftershocks following an earthquake.

The provision of amenities, resources and facilities may include coordinating clean-up operations after a disaster and transporting and storing emergency supplies for people in outlying areas following a widespread fire or flood.

Providing disaster relief through repairing and reconstructing infrastructure could look like:

•  rebuilding community buildings damaged by a disaster (e.g., aged care homes, churches, halls and schools); and
• replacing disaster damaged equipment used for community and owned by community organisations.

What kind of activities cannot be funded by an ADRF?

While the range of disaster response, relief and recovery efforts listed above is diverse, the ATO makes it clear ADRFs must not provide money for activities which are:

• for the relief of distress that is not a result of the disaster;
• for people outside Australia;
• not for the relief of people; and
• unrelated to the disaster.

To help ensure ADRFs comply with the relevant requirements, the ATO recommends using an application form when making grants to various individuals and organisations. Using an application form can help provide assurance funding is only provided or deployed for accepted uses.

For guidance on best practice fundraising and reporting during times of natural disaster, you can read our article, ‘New reporting standards for charitable fundraising during natural disaster’.

What constitutes a ‘disaster’?

The disaster an ADRF is responding to must be declared a disaster by:

• a treasury minister;
• a minister of a state or territory under the law of the state or territory (or with the approval of); or
•  it 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.

A declaration made by a treasury minister must be announced publicly and must specify the day (or the first day) the disaster is taken to have occurred or started.

Under sections 30-45A and 30-46 of the ITTA, in order to declare a disaster (federally or at a state or territory level), a minister must be satisfied the disaster has both:

• developed rapidly (generally over a number of days to weeks); and
• resulted in widespread damage or physical suffering.

Developed rapidly

The ATO has provided guidance around which disasters are likely or unlikely to be considered as having developed rapidly (see below table). We note disasters are not restricted to natural or climate driven events.

 

Likely rapidly developed disasters:	Disasters not considered to be developed rapidly:
Crop and animal diseases (those which have quickly developed)	Climate change or global warming
Cyclones, including typhoons and hurricanes	Drought
Earthquakes	Land salinity
Epidemics or war-like actions	Soil erosion
Fires	-
Floods	-
Landslides	-
Large-scale transport accidents or chemical accidents	-
Meteorite strikes	-
Plagues	-
Storms or storm surges, including hailstorms	-
Terrorist acts	-
Tornados	-
Tsunamis	-
Volcanic eruptions	-

 

Widespread damage or physical suffering

In order to qualify as a disaster of this type, the disaster must have resulted in one or both of the following:

• the death, serious injury or other physical suffering of a large number of people; and
• widespread damage to property or the natural environment.

This classification may be affected by the nature of the disaster, with the ATO stating the presence of a crop disease on one 30 hectare farm may not be widespread damage, however, the damage caused by a fire through the same area in a city may be considered widespread.

A list of disasters meeting the eligibility requirements can be found on the ATO website. Examples include, the respective 2019/2020 bushfires, the COVID-19 Pandemic and the 2022 Queensland and New South Wales floods.

What are the general DGR requirements?

To be eligible for DGR endorsement, an organisation or fund must generally:

• be a not-for-profit;
• have an Australian Business Number (ABN);
• fit into a specific DGR category/type and satisfy any specific eligibility criteria for that DGR type (in this case ADRF);
• 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
• if applicable, comply with the public fund or gift fund requirements (see below).

To gain a deeper understanding of DGR endorsement, you can read our article, ‘Could your organisation be endorsed as a deductible gift recipient?’

What are the applicable public fund requirements?

As outlined in the ATO Public Fund Guidance, a public fund must:

• have its own name;
• have its own objects and rules clearly set out in the entity’s constitutional documents or in a separate governing document or trust deed;
• receive contributions from the public (a failure to do so will result in the fund losing its DGR endorsement);
• issue its own receipts for donations;
• have its own bank account to deposit tax-deductible donations with clear accounting procedures to allow for transparency and accountability; and
• have its own management committee of at least three people to manage the public fund (with the majority of the management committee meeting the ‘responsible person’ requirement as set out by the ATO).

What conditions apply to a gift made to an ADRF?

Sections 30-45A(4) and 30-46(2) of the ITAA place a gift condition which limits tax deductions for donations to ADRFs to be claimed for the first two years after the disaster is declared or the date specified in the declaration.

How we can help with DGR endorsements

If you would like to find out more about DGR endorsement or if you would like to establish an Australian disaster relief fund, please get in touch with our specialist Charities + Social Sector Lawyers.