The Treasury Laws Amendment (Refining and Improving our Tax System) Act 2023 received royal assent on 28 June 2023. The new legislation amends the Income Tax Assessment Act 1997 to transfer administrative responsibility of four unique deductible gift recipient (DGR) categories from other government departments to the Australian Taxation Office (ATO). In this article, we explore these reforms and what they mean for you.

What is a deductible gift recipient?

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 is changing?

The ATO will now manage the:

1. Register of Cultural Organisations (previously administered by the Department of Infrastructure, Transport, Regional Development, Communications and the Arts);
2. Register of Environmental Organisations (previously administered by the Department of Climate Change, Energy, the Environment and Water);
3. Register of Harm Prevention Charities (previously administered by the Department of Social Services); and
4. Overseas Aid Gift Deductibility Scheme (previously administered by the Department of Foreign Affairs and Trade).

This means all applications for DGR endorsement under these categories will be processed and administered by the ATO.

Why were the reforms made?

The ATO already administer 48 out of the 52 DGR categories set out in Division 30 of the Income Tax Assessment Act 1997 (Cth). The changes mean the ATO now administer all DGR categories. The aim is to:

• enable consistency of administration;
• reduce red tape; and
• simplify and streamline the application process for organisations seeking DGR endorsement.

What do the changes mean for you?

If you operate an entity currently endorsed as a DGR through one of these four DGR categories, you will remain endorsed if you continue to meet the eligibility criteria for each category. Interestingly, the requirement to operate a public fund has been removed, instead requiring charities to establish and operate a gift fund. While this will be welcome news for many charities endorsed under these DGR categories, it may cause confusion for some (in particular charities that have a pre-existing second DGR endorsement).

Information about each DGR category can be found on the ATO website.

If you have an in-progress application with one of the four government departments, your application will be transferred to the ATO from 1 January 2024.

If you are currently applying or plan on applying for DGR endorsement through one of the affected categories, you should consider taking steps to ensure your entity is and remains compliant with the new ATO requirements.

Applications for DGR endorsement can be made one of two ways, either through the Australian Charities and Not-for-Profits Commission (ACNC) charity application process or if you are already a registered charity, separately by submitting an application directly to the ATO.

How can we help?

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