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).
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 requirements come into effect?
The requirement to be registered as a charity with the ACNC will apply from 14 December 2021.
Due to the transitional arrangements, existing DGRs and DGR applicants will have until 14 December 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 three 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 3045(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?