Deductible gift recipient (DGR) status carries with it certain legal responsibilities and only certain types of entities qualify. As with organisations registered as a charity, a deductible gift recipient or DGR receives a special legal status that can only be assigned and endorsed by the Australian Taxation Office (ATO). These entities must conduct their activities under specific categories.
What is a Deductible Gift Recipient (DGR) Status?
Entities that are endorsed as a deductible gift recipient (DGR) can receive income tax deductible donations. This means that a donor making a contribution to a DGR is able to claim deductions to his or her taxable income in an annual income tax return. Organisations with DGR endorsements can offer donors a tax receipt for their donations and will typically publicise that donations over $2 are tax deductible.
In addition to this, becoming endorsed as a Deductible gift recipient will often allow an organisation to qualify for additional sources of funding, such as money from entities that are only permitted to make donations to an organisation endorsed as a DGR. According to ATO, the deductible gift recipient charity can include two types of organisations. These entities can benefit from DGR designation if they are focused on providing public services in health, education, research, welfare and rights, national defence, the protection of the environment, family services, international affairs, sports and recreation, cultural organisations, and fire and emergency services.
ATO-Endorsed Deductible Gift Recipient Categories (DGRs)
Item categories of two number of different types of deductible gift recipients with DGR status: those endorsed by the ATO, and those listed by name in the tax law. There are 11 DGR categories and 52 sub-categories endorsed by the ATO, each with different eligibility criteria. Generally though, eligibility is determined by the organisation or fund’s purpose.
Examples of Organisations Eligible for DGR Status
- Public hospitals or health centres run by an association or society
- Public authorities engaged in research about humans, animals, or plants
- Organisations that conduct health promotion
- Public ambulance services
- Community organisations advancing mental health
- Public Universities
- Residential Education institutions
- Higher Education Institutions
- Technical and further education institutions (TAFE)
- Entities providing religious instruction in government schools
- Schools requiring maintenance or construction (e.g. rural schools)
- Government special schools
- Entities providing scholarships
- Life education companies
- Research institutes
- Universities and colleges
Welfare and Rights
- Institutions working on eliminating poverty
- Institutions that fund other organisations focused on poverty issues
- Harm and disease prevention charities
- Disaster relief funds
- Animal welfare charities
- Gifts made for the purpose of defence
- Funds established for members of the armed forces
- War memorial repair funds
- Organisations tackling issues of climate change, energy, environment and water protection
- Organisations providing marriage education
- Organisations providing counselling or family dispute resolution
- Organisations providing relief in a developing country
- Organisations providing disaster relief in a developing country
Sports and Recreation
- Girl Guides Branches
- Scout Branches
- Organisations promoting literature, music, performing arts, visual arts, craft, design, film, video, television, radio, community arts, or Indigenous arts, language and culture programs.
- Public libraries
- Public museums
- Public art galleries
Fire and Emergency Services
- Organisations coordinating volunteer fire brigades or state of emergency services
- Entities providing fire and emergency services
Proposed Reforms to DGR Categories
In January 2023, Assistant Charities Minister Andrew Leigh announced that the Australian government was conducting public consultations to determine how best to simplify the process of receiving tax deductibility status. Under the proposed reforms, the ATO would become responsible for administering all DGR categories. If approved, the Deductible Gift Recipient Registers Reform would transfer the responsibility of determining eligibility of four categories currently administered by other agencies to the ATO. These categories include:
- Environmental organisations (currently under the jurisdiction of the Department of Climate Change, Energy, the Environment and Water),
- Cultural organisations (currently under the jurisdiction of the Department of Infrastructure, Transport, Regional Development, Communications and the Arts),
- Harm prevention charities (currently under the jurisdiction of the Department of Social Services), and
- Overseas aid organisations (currently under the jurisdiction of the Department of Foreign Affairs and Trade).
The purpose of these reforms is to reduce bureaucratic red tape and create more consistency across governmental departments. The system also needs modernisation. Many of the old categories no longer reflect the work Australian charities are doing. The proposed changes would also allow charities can receive DGR status based on the quality of their work, rather than which category they fit into.
How to Get Deductible Gift Recipient Status
The Australian Charities and Not-for-profits Commission (ACNC) outlines some of the recent reforms to the Deductible Gift Recipient system. Not every charity is eligible for DGR status endorsement. To receive the DGR category, your organisation will need to register with the ACNC and be endorsed by the Australian Taxation Office (ATO).
Deductible gift recipient endorsement is determined by the ATO (or named in tax law). It is a legal endorsement that operates separately from charitable status. Not all charities are eligible for DGR endorsement. In December 2021, the Australian government instituted changes to the eligibility criteria. Since then, most DGR organisations must be registered charities to receive endorsement. Some specific examples of organisations that have DGR status but are not charitable, are government-run institutes such as the Royal Children’s Hospital of Melbourne or the National Gallery of Victoria. Both organisations have created foundations that have DGR status. The sub-funds can accept donations and provide tax deductible receipts to donors.
Organisations categorised as either DGR Item 1 (DGR1) and DGR Item 2 (DGR 2) are most common, but both categories also have multiple sub-categorisations. Deductible Gift Recipients with DGR1 status are sometimes called “doing DGRs”because they directly engage in activities that serve the public. Most organisations with DGR status are designated as type 1 DGRs. In a simplified sense, they are organisations that carry out charitable works and use tax-deductible donations to fund these activities. On the other hand, organisations with DGR2 status are often called “giving DGRs”. These are ancillary funds, such as Private Ancillary Funds or Public Ancillary Funds that disperse funds to DGR1 organisations to support them in carrying out their charitable purpose. Obtaining DGR2 status allows them to offer tax deductible receipts to donors or bequests that contribute to the capital of a charitable trust fund. DGR2 organisations are typically restricted from engaging in direct activities.
How Do DGR Tax Deductions Work?
Although this might seem like a strange arrangement, the primary benefit of the double layer of the deductible gift recipient status is that it allows donors to a charitable trust to claim tax deductibility on a financial donation into that charitable trust providing that the trust only makes grants to other DGR organisations. This arrangement allows the donor to claim the same right to deductibility that they would otherwise have received if they had made the donation directly to the organisation receiving the trust’s grant. The value of your donor’s tax deduction depends on the amount they earn and the rate of tax they pay.
Organisations with DGR status can only provide tax deductible receipts for eligible gifts. To qualify, the gift must be given freely with no material reward. Tax deductible receipts may not be given for activities such as raffles, lotteries, merchandise sales, membership fees, conference fees, sponsorships, philanthropic or government grants, fundraising events, or gifts from international commercial enterprises. Only gifts directly made to the DGR entity, fund, authority or institution are considered tax deductible.
The gift or donation must be voluntarily transferred without the expectation of receiving a material benefit (something with monetary value) or advantage. The gift can be in the form of money, a property, or a financial asset such as shares in a company. All donations must comply with conditions laid out by tax law. To claim the tax deduction, the donor must record their donation by requesting an official receipt. You may only claim the amount mentioned in the receipt.
How do I get Deductible Gift Recipient status?
To register as a DGR, your organisation must first obtain an Australian Business Number (ABN). The organisation name in the application must be identical to the name used for your ABN. You should provide detailed contact information, including an address, a primary contact person, and information about the legal structure of your organisation. Individuals, government entities, and sole traders are not eligible to register as charities. Applicants must provide a copy of their organisation’s governing document, outlining its purpose and the rules by which it operates.
What are the different charity subtypes available at the time of registration?
There are 14 subtypes of charities, including 12 charitable purposes described in the Charities Act of 2013 (Cth), public benevolent institutions, and health promotion charities. To determine which charity subtype is the right one for you, visit the Australian Charities and Not-for-Profits Commission webpage. Your subtype will be determined according to your organisation’s objectives and activities. This may include advancing, health, education, social or public welfare, religion, culture, Indigenous reconciliation, human rights, public safety and security, preventing animal cruelty, or protecting the natural environment.
Why should organisations get Deductible Gift Recipient status?
Entities that are endorsed as a deductible gift recipient can receive income tax deductible donations. This means that a donor to a DGR is able to claim deductions to his or her taxable income in an annual income tax return after making a donation. Organisations with DGR endorsements will offer donors a tax receipt for their donations and will typically publicise that donations over $2 are tax deductible. Tax deductible receipts provide financial incentives because they can reduce the amount of income tax donors pay. They also provide evidence of expenses. In general, higher-income earners benefit the most from income tax deductions, making it an appealing option for organisations that regularly conduct fundraising activities.
What are deductible gift recipient eligibility limits?
It is important to be aware that while Deductible gift recipient status permits an organisation to offer tax deductibility to their donors, the organisation may still be required to register with the relevant State authorities in order to conduct fundraising campaigns. Becoming endorsed as a Deductible gift recipient can be a long and challenging process. It is advised that organisations seeking DGR status consult guidance from the ATO to help determine whether they qualify and to assist in the preparation of an application. The ATO states that DGRs must be public funds and be established and operated within Australia.
What is the 'In Australia' condition? Do the purposes and beneficiaries of my DGR have to be in Australia?
No, as long as your institution or organisation is set up and run in Australia, you may be eligible for DGR status for activities that focus on developing countries. If most of your board members, donors, and assets are located in the overseas country, you will not meet the ‘in Australia’ condition and will not be endorsed. Since December 14th, 2021, the ATO has added a requirement for DGR endorsement to register as a charity. That said, the purpose and beneficiaries do not have to be located in Australia, unless your DGR category specifically conducts these types of activities.
Below are a few quick links to government information on DGR status that will help inform a decision regarding whether to apply for endorsement:
ATO Guide – “Is my organisation eligible for DGR endorsement?”
ATO Guide – “Instructions for Endorsement as a DGR”
Deductible Gift Recipient Information in Detail – Types of DGRs
Deductible Gift Recipient Information in Detail – DGR Schedules
Australian Business Register DGR Factsheet and Lookup – Deductible Gift Recipient
Deductible Gift Recipient Registers Reform - Draft Proposal
This fact sheet is intended as a simple overview. Non-profit law is incredibly complex and there are many components, allowances, restrictions, exceptions and important qualifications that are not described above. Dedicated legal advice should be sought from a legal practitioner before taking action.