Deductible Gift Recipient Reforms: Charity Registration + Pastoral Care Fund

What is Deductible Gift Recipient?

Deductible Gift Recipient (DGR) organisations can receive donations that are tax deductible. This enables donors to deduct the amount of their donation from their taxable income when they lodge their tax return. Many charities apply for DGR status as it encourages and incentivises donations from their communities.

The tax deduction is available for donations of $2 or more from the date specified in the legislation.

However, not all charities meet the requirements to be eligible as a DGR, as such registering as a charity and registering as a DGR organization is two separate processes. There are currently 52 categories of endorsement, each with specific criteria. More information on these categories can be found on the ATO Website or by contacting the Breakthrough Accounting Team.

Legislative Reforms

On 5 December 2017 the government announced reforms of the administration and oversight of organisations with deductible gift recipient (DGR) status. The changes are aimed at removing administrative complexity within the DGR system.

In September 2021 an amendment was made to the existing legislation, and the Mid-Year Economic and Fiscal Outlook 2021-22 also announced upcoming amendments. These amendments are discussed below.

Amendment: Charity Registration

On 13 September 2021, Treasury Laws Amendment (2021 Measures No. 2) Act 2021 became law. The amendment establishes a precondition to DGR status, that all DGR organisations are either:

• a registered charity,
• a government agency, or
• operated by a registered charity or an Australian government agency.

The exceptions to this measure are ancillary funds or DGRs specifically listed in the tax law. The Act requires non-government deductible gift recipients (DGRs) to be a registered charity from 14 December 2021. These is a 12-month general transition period and an additional three-year extended transition period, in limited circumstances.

Proposed Amendment: Pastoral Care Fund

On 16 December 2021, the Government announced it would establish a new DGR category for pastoral care funds.

The new category is designed to attract philanthropic donations to support an increase of pastoral care and analogous wellbeing services to students in Australian schools. This category applies to pastoral care services in both primary and secondary schools.

This proposed amendment is estimated to decrease receipts by $28.0 million over the forward estimates period.

The ATO Assistant Commissioner, Jennifer Moltisanti, expects the relevant legislation to be introduced for this amendment in 2022.

Other Upcoming Amendments

The ATO Assistant Commissioner, Jennifer Moltisanti, has also announced that upcoming changes to DGR will include transfer of four DGR Registers to the ATO and ACNC, and the removal of public fund requirement for DGRs. We will provide further information on these measures as they are announced.

How we can help?

DGR status is a convoluted area of NFP law that is currently undergoing many changes, as outlined above. At Breakthrough Accounting, we have experience working with charities who have DGR status and charities that do not have DGR status. We understand the complexities of meeting the requirements and applying for this status. The Breakthrough Accounting Team ensures that they are up to date and across these rule changes, so that you can continue to focus on your core business functions.

Please reach out to us if you have any questions about DGR status, or the changes outlined above. We will continue to update you on key NFP legislative amendments as they are announced and processed.

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