DGR Regulatory Changes
In September 2021, the Treasury Laws Amendment (2021 Measures No. 2) Act 2021 was passed which requires non- charity non-government deductible gift recipients (DGRs) to become registered charities from 14 December 2021.
Charity registration is an existing requirement for the majority of general DGR categories. The amendment extends this requirement to the remaining DGR categories, except for ancillary funds or DGRs that are specifically listed in tax law.
These changes form part of the DGR reform announced by the government in December 2017. They are designed to improve the consistency of regulation, governance and oversight of DGRs in order to uphold community confidence and trust in the sector.
For more information see Deductible gift recipient reform.
Schedule 1 to the Act amends the special conditions for 11 general (presently non-charity) DGR categories in Subdivision 30-B. Under these amendments, a fund, authority or institution seeking to rely (or relying) on any of these categories for DGR endorsement must be:
- a registered charity; or
- an Australian government agency; or
- operated by a registered charity or an Australian government agency.
The 11 categories of DGR, (from among the total number of 52 general categories) previously not required to be registered charities (listed in para 1.8 of the explanatory memorandum) are:
- Health – Public fund for hospitals (Item 1.1.3 section 30-20);
- Health – Public fund for public ambulance services (Item 1.1.8 in section 30-20);
- Education – Public fund for religious instruction in government schools (Item 2.1.8 in section 30-25);
- Education – Roman Catholic public fund for religious instruction in government schools (Item 2.1.9 in section 30-25);
- Education – School building fund (Item 2.1.10 in section 30-25);
- Education – Public fund for rural school hostel building (Item 2.1.11 in section 30-25);
- Research – Approved Research Institute (Item 3.1.1 in section 30-40);
- Welfare and Rights – Public fund for persons in necessitous circumstances (Item 4.1.3 in section 30-45);
- Environment – Public fund on the Register of Environmental Organisations (REO) (Item 6.1.1 in section 30-55);
- Cultural organisations – Public fund on the Register of Cultural Organisations (ROCO) (Item 12.1.1 in section 30-100);
- Fire and Emergency Services – Fire and emergency services fund (Item 12A.1.3 in section 30-102).
Charity registration is not required for Australian government agencies as government entities are excluded from being a charity under the Charities Act 2013.
The Bill replaces any reference to non-government DGRs with the phrase “registered charity”.
The Schedules which detail the changes, generally apply to funds authorities and institutions 3 months after Royal Assent (which was 4 September 2021) (the application date), but Schedule 1 also includes transitional provisions to give existing non-charity DGRs and existing DGR applicants an additional 12 months (transitional application date) (and on application to the Commissioner before the transitional application date) possibly up to another 3 years after the transitional application date to become a registered charity.
If an endorsed DGR is not a registered charity or operated by a registered charity by the required time, it must give the Commissioner of Taxation written notice that it has ceased to be entitled to DGR endorsement. This reflects the existing obligation under section 426-45 of Schedule 1 of the Tax Administration Act 1953 (TAA 1953), which requires an endorsed entity to give the Commissioner written notice if it ceases to be entitled to endorsement. A failure to comply with this requirement is an offence under the TAA 1953.
These amendments do not affect ancillary funds or funds specifically listed by name as DGRs in the tax law.