A deductible gift recipient is the name given to a class of organisations entitled to special tax concessions under the Income Tax legislation. Primarily the advantage of being a DGR is that when a DGR receives a donation it can provide the donor with a receipt for which they can claim a tax deduction.
Some DGRs are also able to claim special fringe benefits tax concessions which enable them to provide better salary packages to their staff.
Some organisations believe it is better to be a DGR, however did you know that:
- Some charities are able to provide a receipt to a donor for which the donor can claim a tax deduction without the charity being a DGR.
- Being endorsed as a DGR may restrict the activities in which an organisation can engage.
- Non-compliance with the requirements relating to DGRs can lead to dis-endorsement, backdated tax assessments and the imposition of penalties.
There are over 40 types of DGR provided for in the Income Tax Assessment Act 1997. We can assist you to consider whether your organisation might fit within the criteria of any of these. For example:
- An ancillary fund is a type of charitable trust fund which is established and used to collect funds and to distribute them to worthy causes. There are two type of ancillary funds, one is a public fund and one is a private fund. They are similar, but in the main the difference is the source of the funds. With a public fund the funds must be collected from the public. Ancillary funds cannot conduct activity (other than fundraising).
- Other DGR funds include necessitous circumstances, disaster relief, school building funds
- There are a number of DGR categories open to organisations which conduct activity including public benevolent instition, health promotion, harm prevention, overseas aid, research institutions, public library.
- Some categories of DGR require that the organisation itself (as a whole) be endorsed whilst others allow part only of the organisation to be endorsed or a public fund hosted by the organisation to be registered and endorsed
We can assist you to establish a DGR.
We can assist you to create a public fund, corporate structure or trust for the purpose of registration and endorsement as a DGR.
If you are operating a DGR, you might consider:
- Have you recently reviewed whether your documents and practices comply with ACNC and ATO requirements?
- Does your board have sufficient persons considered to be responsible to the community as required by the ATO
- Is the board as effective as it could be – does it have rules which require the directors to self-evaluate and for there to be a healthy turnover after fixed terms and independence in the process of recruitment and selection?
- Has the organisation expanded its services to include activity which means it is no longer a fund but an institution – is it at risk of non – compliance with the law?
- Does the board need some assistance to resolve issues created by the tensions or dynamics of human relationships
- How long is it since you reviewed the governance documents to ensure they are relevant, up to date and comply with the law, for eg does it talk about delegated responsibility?
- Would your organisation benefit from induction processes for the board, a board charter
- How long is it since the board updated on the law relating to charities and DGRs including fiduciary duties, competition and consumer law, fund-raising
Currently there is a government review which may change the processes and rules relating to DGR’s such as those relating to overseas aid agencies, environmental organisations and harm prevention charities. Do you understand how this DGR review may impact on you?
