30/09/2021

Plans to reform the laws relating to deductible gift recipient (DGR) endorsement, which have been under consideration since 2017, will come into effect on 1 October 2021.

The Treasury Laws Amendment (2021 Measures No. 2) Bill 2021 (Bill) passed both Houses of Parliament on 2 September 2021 and received Royal Assent on 13 September 2021.

What is a deductible gift recipient (DGR)?

A DGR can receive tax deductible gifts from donors, which could be an individual or a company/organisation. A genuine gift made to a DGR can be claimed as a deduction against the donor's taxable income when they lodge their tax return.

What are the proposed DGR amendments?

The Bill amends the Income Tax Assessment Act 1997 (Cth) (ITAA 97) to require non-government entities (including funds, authorities and institutions) seeking to obtain or maintain DGR endorsement to be either:

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

However, ancillary funds and organisations specifically listed by name in the ITAA97 will be exempt from these new requirements.

When will the amendments come into effect?

Whilst the Bill comes into effect on 1 October 2021, the requirement to be registered as a charity with the ACNC will apply from 1 January 2022.

Due to the transitional arrangements, existing DGRs and DGR applicants will have an additional 12 months from 1 January 2022 before the requirement to become a registered charity with the ACNC applies. There is also an option to apply to the Commissioner within this window for an extension (of up to four years).

Who will be affected by the proposed amendments?

Whilst the requirement for non-government entities to be charities registered with the ACNC already applies to most DGR categories contained in the ITAA 97, there are a number of DGR categories that did not need to be a registered charity until now.

The table below outlines the DGR categories that previously did not require ACNC registration to obtain and/or maintain DGR endorsement (other than for government entities) but do now.

Topic

DGR category

ITAA 97 reference

Health

Public fund for hospitals

Item 1.1.3 in s 30-20(1)

Health

Public fund for public ambulance services

Item 1.1.8 in s 30-20(1)

Education

Public fund for religious instruction in government schools

Item 2.1.8 in s 30-25(1)

Education

Roman Catholic public fund for religious instruction in government schools

Item 2.1.9 in s 30-25(1)

Education

School building fund (item 2.1.10 in s 30-25(1);

Item 2.1.10 in s 30-25(1)

Education

Public fund for rural school hostel building

Item 2.1.11 in s 30-25(1)

Approved research institute

Approved research institute

 

Item 3.1.1 in s 30-40(1)

Welfare and rights

Public fund for persons in necessitous circumstances

Item 4.1.3 in s 30‑45(1)

Environment

Public fund on the Register of Environmental Organisations (REO)

Item 6.1.1 in s 30-55

Cultural organisations

public fund on the Register of Cultural Organisations (ROCO)

Items 12.1.1 in s 20-100(1)

Fire and emergency services

Fire and emergency services fund

 

Item 12A.1.3 in s 30-102

What does this mean for you?

If you operate an entity that currently has DGR endorsement through one of the DGR categories affected by the Bill, or if you are currently applying or plan on applying for DGR endorsement through one of the affected categories, you should consider taking steps now to ensure your entity is and remains compliant. This is because the amendments not only apply prospectively (i.e. to new DGR applicants) but also to current DGRs. In other words, ACNC charity registration is required even where DGR endorsement was granted prior to the amendments coming into effect.

Registration as a charity with the ACNC can take a considerable amount of time, so it is best to get started on the process as early as possible. It is likely that the governing document of your entity will need to be amended to be compliant with the ACNC requirements and in some circumstances a restructure may also be needed, all of which can take time.

For more information about the requirements of a charity see our article What is a Charity?

How can we help?

If you would like more information about the amendments, need help complying with the new requirements or if you need assistance applying for charity registration with the ACNC, please get in touch with our specialist Charities + Social Sector lawyers.

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