Publication

Charity Registration has become a Precondition for Deductible Gift Recipient Endorsement

by Zoe Wu, Belinda Marsh and Joanne Grant
10 September 2021
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The Treasury Laws Amendment (2021 Measures No 2) Bill 2021 (Bill) which amends the Income Tax Assessment Act 1997 (ITAA 1997) was passed by both Houses of the Parliament on 2 September 2021 and awaits assent.  Schedule 1 of the Bill makes charity registration a precondition for DGR endorsement. 

Current Law

The majority of the general DGR categories in Subdivision 30-B of ITAA 1997 currently have a special condition requiring that the fund, authority or institution be: 

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

However, for the remaining 11 general DGR categories, these requirements do not need to be satisfied for the fund, authority or institution to be entitled to DGR endorsement. These categories are:

  • Health—public fund for hospitals (item 1.1.3 in 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 (item 6.1.1 in section 30‑ 55);
     
  • Cultural organisations—public fund on the Register of Cultural Organisations (item 12.1.1 in section 30‑ 100); and
     
  • Fire and emergency services—fire and emergency services fund (item 12A.1.3 in section 30  102)

New Law

To give effect to these changes, Schedule 1 of the Bill amends the special DGR conditions for 11 general DGR categories in Subdivision 30-B of ITAA 1997 to require that such a fund, authority or institution be a registered charity or an Australian government agency, or be operated by a registered charity or an Australian government agency.

In practice, there will be a streamlined process to allow DGR applicants to lodge a single application with the ACNC seeking charity registration and indicating their intention to be endorsed as a DGR (or as a DGR for the operation of a fund, authority or institution). Once the ACNC is satisfied that the applicant is entitled to be registered as a charity, the ACNC will pass on the necessary information to the ATO to assess the applicant’s entitlement to DGR ednorsement. 

Transitional rules for existing DGRs

Under the transitional rules contained in the Bill, the amendments do not apply to the existing DGRs until after the earlier of the following:

  • when gifts or contributions to the fund, authority or institution become deductible under Division 30 as amended by Schedule 1 (that is, when the existing DGR becomes a registered charity or operated by a registered charity); and
     
  • the transitional application date, which is 12 months after the application date. 

However, if an existing DGR needs additional time to become a registered charity or to be operated by a registered charity, it can request an extended application date. If the Commissioner either agrees to or does not refuse the request, the amendments do not apply to the DGR until after the earlier of the following:

  • the day the Commissioner refuses the request for an extended application date (if relevant); and
     
  • the extended application date, which is three years after the transitional application date.

If your DGR is affected by these changes or you have any queries in relation to charity registration, please do not hesitate to contact us.