What is “Deductible Gift Recipient” status?
DGR status refers to the endorsement granted by the Australian Taxation Office (ATO) to certain entities, allowing them to be considered as Deductible Gift Recipients. The main advantage of being endorsed as a DGR is that it enables donors to claim tax deductions for donations made to that entity, which can encourage them to donate more generously and frequently.
Entities seeking DGR status can apply for either:
Whole-entity DGR status
Encompasses all operations of the entity within a specific DGR category.
Partial-entity DGR status
Limited to a specific fund, authority or institution operated by the entity.
It’s worth noting that donors can only claim income tax deductions for donations made to a DGR or the DGR-endorsed fund/authority/institution operated by the entity.
For instance, donations made to a non-DGR charity will not be tax-deductible unless they are specified for a DGR-endorsed fund, authority or institution.
DGR categories that are approved by the ATO
The different DGR categories that are approved by the ATO are grouped under:
Additionally, there are four categories that are regulated and granted endorsement by other governmental departments, including Cultural Organisations, Environmental organisations, Harm prevention charities, and Overseas aid funds.
What are the requirements to be eligible for Deductible Gift Recipient Status?
To attain DGR status, an entity must adhere to the specific eligibility criteria for the category they are applying for.
From December 2021, institutions, authorities, or funds who wish to achieve DGR status must meet the broad eligibility requirements by either being a charity registered with ACNC or operated by a registered charity. However, this doesn’t apply to ancillary funds or entities listed specifically as DGRs under taxation law.
While some DGRs can have international purposes and beneficiaries under certain categories, they must be established and operated within Australia. On the other hand, some DGRs, such as public funds for providing religious instruction in government schools or Australian war memorial funds, must limit their purposes and beneficiaries exclusively to Australia.
Additionally, some DGR categories may require pre-approval from particular government departments, like the Department of Foreign Affairs and Trade for overseas aid funds, as a prerequisite for granting DGR status to an entity.
The purpose of Gift Funds
In cases where an entity is not granted full-entity DGR status and instead wishes to obtain DGR status for a specific fund, authority, or institution, it must establish a gift fund dedicated solely to the primary purpose of that entity.
All contributions or gifts intended for that specific fund must be made exclusively to that gift fund. No other types of funds or assets may be held by the gift fund.
Furthermore, should the DGR fund, authority, or institution become defunct or have its DGR status revoked, the entity is required to transfer all remaining assets to another DGR fund, authority, or institution.
If the DGR fund or entity was a registered charity, then the remaining assets held by the fund or entity may need to be transferred to another charity with similar charitable purposes.
These requirements ensure that the assets and resources dedicated to a particular DGR fund, authority, or institution are used exclusively for the intended purposes and are preserved for the greater good of the community.
When may the DGR status be revoked?
There are several circumstances in which an entity’s DGR status may be revoked by the ATO:
If the structure or operations of the DGR change in a way that would make it ineligible for DGR status, it is the responsibility of the DGR to report this to the ATO. Failing to do so may result in the ATO taking legal action against the DGR.
In such cases, the entity may be required to transfer any remaining assets to another DGR fund, authority or institution with similar charitable purposes.
How Birchgrove Legal can help with DGR status
Birchgrove Legal is dedicated to providing expert legal advice and assistance to clients seeking to obtain and maintain DGR status. With years of experience in the field of philanthropy and charity law, our team of expert lawyers can guide clients through this complex process.
We can provide comprehensive advice on structuring charitable activities in a tax-effective manner, maximising the impact of donations, and ensuring compliance with the relevant regulations.
Our lawyers can also assist in setting up charitable trusts or foundations, drafting governance documents, and providing ongoing legal support to ensure your philanthropic activities align with your goals and values.