FocusOn - Deductible gift recipients

Deductible gift recipients (DGRs) are entities to which donors can make income tax deductible gifts or contributions.  An organisation’s DGR status is displayed on the Australian Business Register website www.abr.business.gov.au.

Organisations can receive DGR status via two ways:

	listed by name in the Tax Law, or
	apply to the Taxation Office to be endorsed as a DGR.

The majority of DGRs are endorsed by the Taxation Office.

DGRs Listed by Name

Organisations are DGRs listed by name when the Parliament amends the Income Tax Assessment Act 1997 to list them individually.

There may be restrictions impose by law for the gifts made to DGRs listed by name.  For example, gifts or contributions are deductible only if made between certain dates or used for a certain purpose.

DGR Endorsement

There are two types of DGR endorsement:

	Organisations endorsed as a whole, or
	Organisations endorsed for a particular fund, authority or institution it owns or includes.

To apply to be endorsed as a DGR, an organisation must meet all the following requirements:

	be in a DGR category
	be in Australia
	have an Australian Business Number (ABN)
	have acceptable rules dealing with the transfer of surplus gifts and deductible contributions to another DGR on winding up or revocation of endorsement.

If an organisation is to be endorsed for a particular fund, it is also required to maintain a gift fund to receive all gifts and contributions made for the principal purpose of the fund.  The gift fund must be used for that purpose and must have similar clause within its constituent documents dealing with the transfer of surpluses in assets to another DGR in the event of winding-up or revocation of endorsement.

Funds must be established and operated in Australia and have their purpose and beneficiaries in Australia in order to satisfy the ‘in Australia’ requirement.  However, certain categories of funds such as overseas aid funds, developed country disaster relief funds and public funds on the Register of Environmental Organisations, do not need to have their purposes or beneficiaries in Australia.

Private Ancillary Funds (PAFs)

Private Ancillary Funds (PAFs) were previously known as Prescribed Private Funds (PPFs).  However, from 1 October 2009 these types of private fund are no longer required to be gazetted into the Income Tax Assessment Regulations but will instead receive their DGR status via endorsement from the Taxation Office.

For more information on PAFs please refer to our FocusOn Private Ancillary Funds.

Maintaining DGR Status

An entity’s DGR status can be revoked if the following requirements are not met:

	issue receipts for deductible gifts or contributions specifying the information required by law
	provide documents, when required, to the Commissioner showing that the entity continues to be entitled to be endorsed.

The entity must inform the Taxation Office when it ceases to become entitled to be endorsed as a DGR.

A DGR will need to carry out a self-review process.  It is not stipulated in the law the frequency of the self-review.  However, it is recommended by the Taxation Office for the self-review to be carried out at least annually and when there is a major change in the organisation’s structure or activities.  The Taxation Office has produced worksheets that can be used for this self-review process.

The DGR status of a DGR listed by name may be revoked when it fails to meet the conditions on which it was granted its DGR status.  Only the Parliament has the power to revoke the listed DGR status.

How can we help?

Are you considering applying for DGR endorsement for your organisation or fund?  Have you considered using a PAF as a vehicle for your private philanthropy?  Saward Dawson can advise you further on the best way to structure your giving to maximise your tax benefits.  We can assist your organisation or fund in obtaining its DGR status.

Published : April 2010