Deductible Gift Recipient (DGR) status

What is a Deductible Gift Recipient (DGR)?

DGR is a kind of ‘special tax status’ that an organisation can apply for. If your organisation is endorsed (officially recognised) by the Australian Tax Office (ATO) as a DGR:

• people who make gifts or donations to your organisation are able to ‘deduct’ those gifts for their own income tax purposes (that is, the donor can claim the donation as a deduction when filing their personal income tax return); and 
• your organisation can receive funds from certain grant makers and philanthropic bodies, which are only able to give money to organisations that have DGR status.

So, when you see wording ‘donations over $2.00 are tax deductible’ – the organisation offering this as an incentive to the donor must first be ‘endorsed’ by the ATO as a DGR. In general, unless your organisation is endorsed as a DGR, people donating to your organisation can not claim their donation against their tax.

If your organisation as a whole is not eligible to be a DGR, it may be that certain activities of the organisation could attract DGR status. In these circumstances, it may be worth considering establishing a separate fund or entity, which could be eligible for DGR endorsement. You should seek legal advice on this option. 

The legislation that sets out the requirements for DGR status is called the Income Tax Assessment Act 1997 (Cth) (Tax Act). 

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How does an organisation get DGR status?

In general, to receive endorsement as a DGR, your organisation will have to apply to the Australian Tax Office (ATO). The only other option is for your organisation to have itself specifically listed by name in the Tax Act (this requires your organisation to lobby the Commonwealth government for a change in the Tax Act which may be a difficult process and won’t be discussed further here.)

The DGR endorsement process is a separate process to applying to be a tax concession charity (TCC) – (see our page on Income Tax). It is a common misconception that all ‘charities’ can automatically receive tax deductible gifts. That is not the case. All organisations, including charities, need to apply to the ATO for endorsement as a DGR. 

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Is being endorsed as a DGR going to be valuable to our organisation?

Before you go to the trouble of applying for endorsement as a DGR, it is worth noting that your organisation will only benefit from being endorsed as a DGR if:

• it receives gifts from the public; or
• it wants to attract funds from organisations (from certain grant makers and philanthropic bodies) which only give to DGRs.

Unlike donations from individuals, businesses that might want to donate to a not-for-profit organisation can usually claim their donation as a deduction from their tax under other provisions in the Tax Act. So, whether your organisation is a DGR may not be relevant for organisations wanting to attract corporate funding.

Certain categories of DGR status also allow your organisation to offer salary packaging benefits to your employees.

Many of the categories for endorsement as a DGR have certain conditions that apply to them. Your organisation will need to comply with these conditions. There are also record-keeping and reporting requirements that come with being a DGR. You should consider whether being endorsed as a DGR will be of sufficient benefit to your organisation to make it worthwhile. Sometimes the conditions will be too onerous or restrict the activities of your organisation too much.

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Which community organisations may be endorsed as DGRs?

To be endorsed as a DGR, your organisation must fall within one of the categories of DGR specified in the Income Tax Assessment Act 1997 (Cth). An organisation can only apply for one category of DGR.

There are almost 50 different DGR categories. Each category of DGR has certain ‘eligibility criteria’ that your organisation must meet in order to be endorsed by the ATO. We have included a checklist about some of the main categories in the section below. For a full list of categories, and their criteria, you should refer to the ATO’s free Giftpack publication which is the ATO’s guide to DGR. A link to this Guide has been included in the Related Resources section at the end of this page.

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Common DGR categories for community organisations

The checklist below provides some of the more common DGR categories that community organisations may fall in to. 

The factsheet below provides more information for community organisations who wish to recieve DGR status as overseas aid organisations. *NOTE* Recent case law may impact the information contained in the Factsheet: Community organisations with overseas objectices. Updated information will be avaliable soon.

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How do we apply for DGR endorsement?

The process for DGR endorsement varies, depending on the DGR category your organisation is applying for. 

For some categories, your organisation will apply directly to the ATO using their form and providing supporting documentation. Also, for some categories, your organisation will need to apply to a relevant Commonwealth government department for listing on a register first, and then apply to the ATO.

From 3 December 2012, many DGR categories require your organisation to be a registered charity before you can be endorsed by the ATO. Before applying to be a registered charity, your organisation must have an Australian Business Number (ABN). If your organisation doesn't already have an ABN, you should apply, indicating that the organisation intends to apply for DGR status by answering 'yes' to this question on the ABN application form.

More information on registration as a charity with the ACNC and the DGR endorsement process is available in the ATO's Giftpack publication (see Resources at the end of this page)

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Why should our organisation get advice before we apply for DGR endorsement?

For many organisations, it will be a good idea to seek advice from a legal or accounting professional before it applies to the ATO for DGR endorsement  (or if the DGR category your organisation wants to be endorsed as requires your organisation to be a registered charity, before you apply to the ACNC).

This is because, to apply for DGR endorsement, you will need to provide the ATO with copies of your organisation’s constituent documents (rules or constitution). The ATO will look carefully at your organisation’s objects clause (or statement of purposes), to see that it reflects the criteria of the particular DGR category your organisation is applying for. Your constituent documents will also need a non-profit clause and a winding up clause and may need other clauses about funding sources (For more detail see our information about the 'not-for-profit' clauses, see Getting Started > Before you start > What does not-for-profit mean?).

Given the technical language required to comply with many of the categories, it is advisable to seek advice and assistance in drafting (or re-drafting) some of your organisation’s constituent documents, and with setting up a gift fund and separate accounting procedures, if required. Getting some professional advice could save your organisation a lot of time and resources in the long run.

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If our organisation receives DGR endorsement, what are its obligations?

There are a number of obligations that come with DGR endorsement.

Your organisation must continue to meet the criteria (requirements) for the category of DGR for which it was endorsed. The ATO office recommends that your organisation reviews of its activities regularly (eg. annually) and whenever major structural changes occur, to ensure that it still meets all of its DGR requirements. The ATO has worksheets to assist with the review which are available from the Related Resources section at the end of this page.

Your organisation is required to tell the ATO if changes mean that the organisation no longer fits within the DGR category for which it received endorsement. The ATO has the power to review your organisation's activities and revoke its DGR status if it believes that your organisation no longer meets the DGR requirements.

If your organisation is endorsed as a DGR, it should be particularly careful if it is thinking about starting up completely new programs or services (outside its usual field of work), auspicing another organisation or making other changes to its purposes, structure or the location of its activities (eg. overseas). This is because you may lose your entitlement to DGR endorsement (ie. your organisation may no longer meet the 'dominant purpose' or 'principal activity' requirements of many categories or the 'in Australia' requirement).

Your organisation will also have requirements to issue receipts containing certain information to donors, and to maintain adequate record-keeping and accounting procedures (both for the ATO and where relevant, the government department that administers a register). There may be other obligations that DGRs are required to comply with. Please see the ATO's free Giftpack publication in Related Resources at the end of this page for more information. 

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If we are unsuccessful, what are our options?

This will depend on the reasons for rejection. However, in general before your organisation makes another application they will need to show the ATO that it has made relevant changes, for example to their purposes, constitution, activities, membership.  You must show that the changes mean you now comply with the criteria for the category of DGR for which you are applying to receive endorsement.  The length of time since the previous application is also relevant. It is recommended that organisations wait at least a year in order to have time to properly implement changes.

In some circumstances it may be of assistance to access your files in relation to your application from the ATO. Under the Freedom of Information Act 1982 (Cth), you have the right to access information about you that is held by the ATO, as well as other documents such as any public rulings and guidelines which the ATO used to make its decision. A freedom of information request form is available for download at the ATO website (see Related Resources at the end of this document). There are administrative fees associated with lodging this request (described at page 2 of the form), however if you can demonstrate financial hardship you may seek to have these fees waived.

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Frequently Asked Questions (FAQs)

For a link to frequently asked questions and answers about DGR see below:

Resources

PilchConnect resources

Australian Charities and Not-for-Profit Commission (ACNC)

Australian Tax Office (ATO)

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