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Changes are being made to DGR laws

Before we take you further, we want to mention that there are changes coming to the deductible gift recipient (DGR) laws. The changes only affect a small group of current DGRs, but would remove some of the administrative requirements if your organisation gets DGR status.

The start of these reforms was delayed due to COVID-19, but some of these reforms have now been rolled out. So that we can let you know when laws change, subscribe to receive our free newsletter.

Changes affected

From 14 December 2021 (transitional arrangements may apply), non-government organisations which are endorsed as DGRs as a whole, or endorsed as DGRs for the operation of a fund or institution, are required to register as charities with the Australian Charities and Not-for-profits Commission (ACNC). This measure will not apply to ancillary funds or DGRs specifically listed in the tax law.

Changes still anticipated include:

• removing certain public fund requirements for DGRs, and
• transferring the administration of the four DGR registers to the ACNC and the Australian Taxation Office (ATO)

The ATO has published more information on the DGR law reforms.

Now we will guide you through:

• the meaning and benefits of deductible gift recipient (DGR) endorsement
• whether your organisation will benefit from DGR status, and
• common categories of DGR endorsement

What is DGR status?

Deductible gift recipient (DGR) endorsement is a special tax status that an organisation can get from the Australian Tax Office (ATO).

People who make gifts or donations to a DGR may be able to ‘deduct’ those gifts from their own income for tax purposes, provided certain conditions are met (for example, that the amount is over $2 and is made for the DGR purpose), and DGRs may be eligible to receive funds from certain grant makers and philanthropic bodies that only fund DGRs.

Will your community organisation benefit from DGR status?

An organisation will benefit from being endorsed as a DGR if it:

• already receives donations or gifts from the public
• wants to start fundraising and receiving gifts from the public, or
• wants to attract funds from the grant makers and philanthropic bodies that can only give funds to DGRs

DGR status is not always essential for not-for-profits to run successfully and not-for-profits can fundraise without being a DGR.

Refer to our DGR guide for more information.

Some types of organisations may not be eligible for DGR endorsement

Organisations including sporting clubs and associations, churches and peak bodies are generally not eligible for deductible gift recipient (DGR) endorsement because their purposes and activities don't fall into the general DGR categories.

If your organisation is a sporting club or association, church or peak body, you may want to contact the Australian Tax Office (ATO), the peak body for your sport, or if you think there are special circumstances about the nature of your organisation (for example, you also provide welfare services to vulnerable young people), apply for free legal help.

What are the requirements for an organisation to be endorsed as a DGR?

To be endorsed as a deductible gift recipient (DGR), an organisation must:

• be established and operating in Australia
• have an Australian Business Number (ABN)
• be not-for-profit
• have acceptable rules for transferring surplus gifts and deductible contributions if the organisation or fund is wound up or its DGR status is revoked (these rules are normally in the organisation's governing document)
• fall into a recognised general category of DGR or operate a fund or institution that falls within a recognised general category of DGR, under Australian tax law
• in some cases, set up a public fund, and
• in some cases, set up a gift fund

Registration with the Australian Charities and Not-for-profits Commission

From 14 December 2021 (transitional arrangements may apply), all non-government deductible gift recipient (DGR) categories require registration as a charity with the Australian Charities and Not-for-profits Commission (ACNC) before they can be endorsed as a DGR.

We will now consider whether your organisation meets the basic eligibility requirements for DGR status

After that, we’ll look at some of the more common DGR categories to assess whether any are relevant to your organisation.

Basic eligibility – ‘in Australia’

Basic eligibility – ‘in Australia’

You will need to take further steps to meet the 'in Australia' requirement.

Remember, your organisation will also need to meet the other basic eligibility requirements - that is your organisation must:

• have an Australian Business Number (ABN)
• be not-for-profit, and
• have acceptable rules for transferring surplus gifts and deductible contributions if the organisation or fund is wound up or its DGR status is revoked (these rules are normally in the organisation's governing document)

For more information, see our free resources on starting a not-for-profit organisation and registering as a charity with the ACNC.

You can also apply for free legal help with our Not-for-profit Law team to find out if you may be eligible for legal assistance.

What would you like to do now?

Basic eligibility – Australian business number

Basic eligibility – Australian business number

While your organisation is not eligible for deductible gift recipient (DGR) status without an ABN, obtaining an ABN is generally a fairly simple process.

Remember, your organisation will also need to meet the other basic eligibility requirements - that is, your organisation must:

• be established and operating in Australia
• be not-for-profit, and
• have acceptable rules for transferring surplus gifts and deductible contributions if the organisation or fund is wound up or its DGR status is revoked (these rules are normally found in the organisation's governing document)

For more information, see our free resources on starting a not-for-profit organisation and registering as a charity with the ACNC.

You can also apply for free legal help from our Not-for-profit Law team to find out if you may be eligible for legal assistance.

Basic eligibility – not-for-profit

To meet this requirement, your organisation’s governing document (rules, constitution or trust deed) must provide that:

• the organisation’s assets and income are used solely to further the organisation’s purposes, and
• payments or benefits are not given to members or other people related to the organisation (other than as reimbursement for services they have provided or for reasonable expenses they have incurred on behalf of the organisation)

Basic eligibility – not-for-profit

While your organisation is not eligible for deductible gift recipient (DGR) status without this clause, your organisation's governing document (rules, constitution or trust deed) can be amended to include this wording.

Remember, your organisation will also need to meet other basic eligibility requirements - that is your organisation must:

• be established and operating in Australia
• have an Australian Business Number (ABN), and
• have acceptable rules for transferring surplus gifts and deductible contributions if the organisation is wound up or its DGR status is revoked (these rules are normally in the organisation's governing document)

For more information, see our free resources on starting a not-for-profit organisation and registering as a charity with the ACNC.

You can also apply for free legal help from our Not-for-profit Law team to find out if you may be eligible for legal assistance.

Basic eligibility – an appropriate winding up and revocation clause

Most organisations have a winding up clause in their rules stating where the organisation’s funds will go if the organisation ends (if, for example, it is wound up or deregistered).

To be eligible to apply for deductible gift recipient (DGR) status, your organisation’s governing document (rules, constitution or trust deed) must have the right wording for the transfer of surplus gifts and deductible contributions if the organisation is wound up or if its DGR status is revoked.

Basic eligibility – an appropriate winding up and revocation clause

While your organisation is not eligible for deductible gift recipient (DGR) status without this clause, your organisation's governing document (rules, constitution or trust deed) can be amended to include this wording. Your organisation will not be eligible to apply for deductible gift recipient (DGR) status without meeting this requirement.

Remember, your organisation will also need to meet the other basic eligibility requirements - that is, your organisation must:

• be established and operating in Australia
• have an Australian Business Number (ABN), and
• be not-for-profit

For more information, see our free resources on starting a not-for-profit organisation and registering as a charity with the ACNC.

You can also apply for free legal help from our Not-for-profit Law team to find out if you may be eligible for legal assistance.

Visit our website for more free legal information for your community organisation.

Subscribe to our newsletter for the latest news on policy and law reform developments, online legal information resources, training opportunities and other issues affecting charities and not-for-profits in Australia.

Basic eligibility requirements conclusion

From the answers you have given, it appears that your organisation is likely to meet the basic eligibility requirements to apply for deductible gift recipient (DGR) status.

Deductible gift recipient categories

There are more than 50 deductible gift recipient (DGR) categories. You can see the full list on the Australian Tax Office (ATO) website.

Your organisation (or a fund or institution that it operates) must fit into one of these DGR categories to obtain DGR status.

This tool does not consider all possible DGR categories. This tool considers some of the most common DGR categories.

We will now ask you questions to assess whether your organisation is likely to fit into one of the more common DGR categories.

You have indicated that the description ‘promotion of the arts, movable cultural heritage or Indigenous languages’ most closely aligns with your organisation’s activities.

The Register of Cultural Organisations category

The Register of Cultural Organisations (ROCO) category appears to be a category relevant to your organisation.

The ROCO exists to promote the arts and Indigenous languages, and to help organisations that do so to access deductible gift recipient (DGR) endorsement and attract funding. Australian organisations can be listed on the register if their principal purpose is to promote the arts in Australia, including the creation of a new theatrical work, publishing a literary magazine or building a community arts centre.

This category may include choirs, dance organisations, festivals, theatre organisations and art exhibition venues, however it would exclude public art galleries, museums and libraries as these come under a different category.

Cultural associations, like specific ethnic associations or clubs, may have difficulty getting DGR endorsement if they don’t promote an aspect of the arts specifically (like literature or film).

To meet the requirements of this category, your organisation must:

• promote at least one of the following – literature, music, a performing art, a visual art, a craft, design, film, video, television, radio, community arts, Indigenous arts or languages or movable cultural heritage
• express the above as its principal purpose in its governing document (meaning the first or most important purpose where the organisation has more than one purpose)
• establish and maintain a public fund to receive gifts for its principal purpose, and
• from 14 December 2021 (transitional provisions may apply), be registered as a charity with the ACNC

Your organisation may also need to meet other requirements.

The application form for DGR status under the ROCO category is available on the Register of Cultural Organisations website. The application process can be lengthy and may take over 12 months

For more information about the ROCO category see:

• the Register of Cultural Organisations Guide
• ATO published information on the Register of Cultural Organisations category
• examples of organisations on the ROCO

The community sheds category

The community sheds category appears to be a category relevant to your organisation. This is a new deductible gift recipient (DGR) category, with organisations able to apply for endorsement from 1 October 2020.

To meet the requirements of this category, your organisation must:

• be registered as a charity with the ACNC
• be a public institution
• have the dominant purpose of advancing mental health and preventing or relieving social isolation(while community sheds may conduct a range of activities, for the purposes of this DGR category, the activities must support the dominant purposes of advancing mental health and preventing or alleviating social isolation)
• include this dominant purpose in your organisation’s governing document (your rules, constitution or trust deed)
• seek to achieve those purposes principally by providing a physical location (your ‘shed’) where the organisation supports people to undertake activities, or work on projects, in the company of others, and
• have open membership (ie. there is no particular criteria for membership for your organisation), or membership that is open to people of a particular gender or with Indigenous heritage, or both

Community sheds may have open membership (meaning that there is no particular criteria for membership for your organisation) or membership that is open to people of a particular gender, with Indigenous heritage or both. This means community sheds may include men’s sheds, women’s sheds, Indigenous peoples’ sheds, Indigenous men’s sheds or Indigenous women’s sheds.

Organisations that are unlikely to be eligible under this category are organisations that are for people of a particular age, for ex-service personnel or for organisations that don’t have physical premises.

Charity registration and DGR application

If your organisation is not yet a registered charity and wants to apply for DGR status under this category, it can:

• apply to become a registered charity through the ACNC website, and
• nominate through the charity registration process that it wishes to also seek DGR endorsement

The relevant information will then be sent to the ATO which will assess the organisation for DGR endorsement.

If your organisation is already a registered charity and wants to apply for DGR status under this category, it can lodge an application for DGR endorsement through the Australian Tax Office (ATO) website.

For more information about the community sheds category see:

• the ATO guidance on this category

You have indicated that the description ‘animals’ most closely aligns with your organisation’s activities.

The animal welfare charity category

The animal welfare charity category appears to be a category relevant to your organisation.

The animal welfare charity category helps organisations that protect and care for animals that have been lost, mistreated or are without owners to access deductible gift recipient (DGR) endorsement and attract funding.

The meaning of animal for this category is broad and includes land animals, reptiles, birds, fish and other aquatic animals.

This category excludes a standard veterinary clinic that assists animals that have owners.

But organisations with a principal activity of advocating for better treatment of animals generally or advocating for vegan lifestyles would be unlikely to be eligible under this category.

To meet the requirements of this category, your organisation must:

• be a registered charity with the ACNC
• conduct activities that are not limited to native wildlife, and
• as its principal activity, provide short-term direct care to animals that have been lost, mistreated or are without owners, or rehabilitate orphaned, sick or injured animals that have been lost, mistreated or are without owners

Examples of activities that may be short-term direct care include:

• veterinary services for animals' injuries and illnesses
• recovery, first aid and transport of injured animals
• washing and grooming lost animals and ridding them of fleas and ticks
• feeding and sheltering animals in the short term while their owners are contacted or new homes are found

If animals are not recovering from injury or sickness and are not in need of rehabilitation, ongoing care for them will not qualify.

Charity registration and DGR application

If your organisation is not yet a registered charity and wants to apply for DGR status under this category, it can:

• apply to become a registered charity through the ACNC website, and
• nominate through the charity registration process that it wishes to also seek DGR endorsement

The relevant information will then be sent to the ATO which will assess the organisation for DGR endorsement.

If your organisation is already a registered charity and wants to apply for DGR status under this category, it can lodge an application for DGR endorsement through the Australian Tax Office (ATO) website.

Your organisation will also be required to submit a prescribed schedule with your application.

For more information about the animal welfare charity category see:

• the ATO webpage on this category

The Register of Environmental Organisations category

The Register of Environmental Organisations category appears to be a category relevant to your organisation.

An environmental organisation is an organisation with the principal purpose of protecting or enhancing the natural environment.

Organisations on the Register under this category include those involved in land, wildlife and rainforest conservation. The activities underlying an environmental organisation's principal purpose must relate to the natural environment as distinct from other types of environments.

Examples of organisations in this category include those established to:

• promote rainforest conservation
• provide education on climate change
• promote awareness of an endangered species
• work with volunteers to deliver a cleaner environment, and
• conserve native wildlife in a particular region

To meet the requirements of this category, your organisation must:

• have a principal purpose of either – the protection and enhancement of the natural environment or a significant aspect of the natural environment, the provision of information or education about the natural environment or a significant aspect of the natural environment, or the carrying out of research about the natural environment or a significant aspect of the natural environment
• list its formal objects in relation to the principal purpose above in its governing document
• be registered on the Register of Environmental Organisations (maintained by the Department of Agriculture, Water and the Environment)
• establish and maintain a public fund, and 
• from 14 December 2021 (transitional provisions may apply), be registered as a charity with the ACNC 

Your organisation may also need to meet other requirements.

People

You have indicated that the word ‘people’ most closely aligns with your organisation’s activities or purposes.

The following note is relevant to the next question.

Health promotion

You have indicated that that your organisation is involved in promoting the prevention or control of diseases in human beings.

The following notes are relevant to the next question.

Welfare

Welfare

You have indicated that your organisation’s primary purpose or activity is assisting people in their welfare.

The public fund for persons in necessitous circumstances category

The public fund for persons in necessitous circumstances category appears to be a category relevant to your organisation.

A necessitous circumstances fund is a public fund established and maintained for the relief of people in Australia who are in ‘necessitous’ circumstances.

The necessitous circumstances fund distributes goods or money to people who don’t have the financial resources for all necessities.

To meet the requirements of this category your organisation must:

• be a public fund
• provide relief to persons located in Australia
• not provide benefits to persons who are not in necessitous circumstances, and
• from 14 December 2021 (transitional provisions may apply), be registered as a charity with the ACNC

Your organisation can lodge an application for DGR endorsement through the Australian Tax Office (ATO) website.

For more information about the public fund for persons in necessitous circumstances category see:

• the ATO webpage on this category

The health promotion charity category

The health promotion charity category appears to be a category relevant to your organisation.

A health promotion charity is a charity with the principal activity of promoting the prevention or control of diseases in human beings.

A health promotion charity can undertake other activities but promoting the prevention or control of disease in human beings must be its main activity. It’s usually not enough to be a health-related charity or to promote ‘health’ or ‘wellbeing’ generally.

‘Disease’ includes physical and mental illness, but it is required to be something more than a health condition or symptom. Your organisation must specify the disease or diseases that will be prevented or controlled through its principal activity.

This category is likely to include charities involved in:

• raising awareness about a disease, its causes and measures that can be taken to guard against contracting it (such as immunising against it)
• acting to reduce the spread of a disease
• researching the management and treatment of diseases
• managing and treating diseases, and
• acting to alleviate the suffering or distress caused by a disease

Activities that are unlikely to fall into this category include organisations that:

• promote healthy lifestyles (for example, the importance of healthy eating and regular exercise), or
• promote a particular type of exercise due to its general health benefits.

To meet the requirements of this category, your organisation must:

• be a registered charity under the 'health promotion charity' subtype
• be an institution, and
• promote the prevention or the control of disease in human beings as the organisation’s principal activity

Charity registration and DGR application

If your organisation wishes to apply for DGR status under this category, it can apply to become a registered charity through the ACNC website and nominate through the charity registration process that it wishes to seek this DGR endorsement. The ATO will accept that an organisation is a health promotion charity if it is registered by the ACNC as a health promotion charity.

For more information about the health promotion charity category see:

• the ATO webpage on this category
• the ACNC’s fact sheet ‘What is a health promotion charity?’
• the ACNC Commissioner’s Interpretation Statement: Health Promotion Charities

Harm prevention charity category

The harm prevention charity category appears to be a category relevant to your organisation.

A harm prevention charity is a registered charity with the primary activity of promoting the prevention or control of ‘behaviour that is harmful or abusive to human beings’.

Harmful or abusive behaviour is defined to mean emotional abuse, sexual abuse, physical abuse, substance abuse, self-harm, suicide or harmful gambling.

A harm prevention charity can provide direct support through counselling or workshops, or indirect support through community education and awareness-raising. The principal activity must directly contribute to the promotion, prevention or control of ‘behaviour that is harmful or abusive to human beings’.

Examples of this category include:

• an organisation established for suicide prevention
• an organisation founded to educate school students on the prevention of emotional abuse and physical abuse
• a charity that delivers education programs designed to prevent harmful gambling

Activities that are indirect or too removed or unrelated to the harmful behaviour may not qualify for DGR status under this category.  

To meet the requirements of this category:

• your organisation must be registered as a charity with the ACNC
• your organisation’s principal activity must be the promotion of the prevention or control of human behaviour that is harmful or abusive to human beings
• your organisation must establish and maintain a public fund to which gifts of money or property are made, along with a public fund management committee, and
• your organisation’s governing documents must include model rules relating to the Public Fund and the harm prevention charity which are outlined in the Register of Harm Prevention Charities guidelines

Once an organisation and its public fund have been entered on the Register of Harm Prevention Charities, it is then eligible for endorsement as a DGR.

To apply for DGR endorsement, the registered charity must complete an application form for entry onto the Register of Harm Prevention Charities and send to the DSS.

The DSS will assess the application, and if the charity is accepted onto the Register, the DSS will send the form on to the ATO to process the DGR endorsement.

The application process can be lengthy and may take over 12 months.

For more information about the harm prevention charity category see:

• the ATO webpage on this category
• the Register of Harm Prevention Charities Guidelines 2014

The public benevolent institution category

The public benevolent institution (PBI) category appears to be a category relevant to your organisation.

Don’t get put off by the language here – it's old fashioned. It may not fit well with the language you prefer to use. For example, the people your organisation helps might not like to be talked about as ‘sufferers’ or being ‘helpless’, but for the purpose of working out your organisation’s eligibility for DGR status, we must use this language.

A PBI is a registered charity with the dominant purpose of providing benevolent relief to people in need.

Benevolent relief includes the relief of poverty, sickness, destitution or helplessness. Providing benevolent relief means that your organisation provides targeted relief for people suffering or in distress. The ACNC recognises the situation of Australia’s Indigenous peoples and their disadvantage. It therefore may recognise an organisation with the purpose of addressing Indigenous disadvantage as being a PBI, along with organisations that seek to promote and protect indigenous culture.

Examples in this category may include:

• disability support services
• some not-for-profit homes for the aged
• housing bodies that provide low rental or subsidised accommodation to underprivileged persons affected by poverty, sickness or disability

The ‘public’ element

If your organisation assists a person rather than a section of the community who need assistance (‘people in need’), then it can’t demonstrate the ‘public’ element required of a public benevolent institution. Here, your organisation may wish to find out more about the ‘necessitous circumstances fund’ category for DGR.

Alternatively, where the purpose of your organisation is to benefit the community as a whole, then this may be considered to be too general for the PBI category.

Fundraising

An organisation whose main activity is fundraising can be registered as a PBI if it can demonstrate:

• clear objects of benevolent relief – the group receiving the relief must be recognisably in need, and the relief must be specifically targeted to the people who are in need rather than directed at the community more generally
• clear mechanisms for delivering the benevolent relief – for fundraising institutions, there must be a clear path to delivery of the relief for which the funds are raised
• a relationship of collaboration or a common public benevolent purpose – the fact that fundraising organisations raise funds for other organisations and don’t provide the relief themselves would not be a barrier to becoming a PBI provided there is a clear relationship of collaboration between the organisation raising the funds and the organisation delivering the aid

Organisations that seek to provide general advice, information or services to the whole or part of a community are unlikely to be considered PBIs.

Operating overseas

If your organisation provides development or humanitarian assistance activities overseas, you may wish to consider the overseas aid gift deduction scheme (OAGDS) category. Under this category, it’s a requirement for eligibility that organisations implement these activities in one of the countries listed by the Minister for Foreign Affairs as a developing country.

Note that:

• it can be more difficult to successfully apply for OAGDS
• there is a higher level of required compliance, and
• not all of the tax benefits available under the PBI category are available under the OAGDS

Additionally, for organisations that conduct activities overseas, you should ensure that you comply with the External Conduct Standards (ECS). See the ACNC website for more information about the ECS.

Charity registration and DGR endorsement

A new charity may be eligible for PBI status if it can demonstrate that it has clear plans to operate in the foreseeable future or within one year of establishment. It can show this through the provision of a business, operational or strategic plan outlining what it proposes to do and how it proposes to execute the plan. It may also demonstrate its intention to operate through provision of an agreement with another party outlining how the organisations intend to work together to provide the relief.

To meet the requirements of this category your organisation must:

• be an institution
• provide benevolent relief to people in need (organisation must identify who is suffering and provide support for the issue that they are suffering from)
• have providing benevolent relief to people in need as your organisation’s main purpose in its governing document, and
• be a registered charity with the ACNC, with the charitable sub-type of ‘public benevolent institution’

To apply to become a PBI with the ACNC, follow the application instructions through the ACNC charity portal.

For more information about the PBI category see:

• the ACNC’s fact sheet ‘What is a public benevolent institution?’
• the ACNC Commissioner’s Interpretation Statement: Public Benevolent Institutions

Common deductible gift recipient categories

This tool covers the most common deductible gift recipient (DGR) categories.

Your organisation does not appear to fall into one of the DGR categories covered by this tool.

A less common category may be relevant to your organisation.

For information on all available categories, see the Australian Tax Office (ATO) website.

For general information on DGR endorsement, see our free DGR guide.

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Not-for-profit Law provides legal advice, education and self-help resources for Australian charities and not-for-profits. If you need further help, take a look at our resources. You can also apply for free legal advice.