Deductible gift recipient (DGR) status

Donors can only claim a tax deduction on donations made to organisations that are endorsed as a deductible gift recipient (DGR). Gaining DGR status is not as easy as you might think – it requires a lot more than just being able to prove your not-for-profit status or your worth to society.

Donors can donate to any not for profit organisation they prefer.

However donors can only claim tax deductions for gifts to DGRs in their income tax returns. There are rules about what sorts of organisations can claim DGR status and about the types of gifts eligible for deductibility.

What is a DGR?

Who can and cannot be a DGR is defined by tax law – with only certain types of organisations eligible.

Some larger organisations are listed by name in Australia's income tax law (for example, Amnesty International) and are automatically classed as DGRs. Others must fall within a general DGR category set out in income tax law.

Legislation amended in September 2021 requires non-government deductible gift recipients (DGRs) to be a registered charity from 14 December 2021, excluding ancillary funds or DGRs that are specifically listed in tax law.

The Treasury Laws Amendment (2021 Measures No. 2) Act 2021 amends the Income Tax Assessment Act 1997 to require a fund, authority or institution to, as a precondition for DGR endorsement, be:

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

According to the Australian Government’s ABN website there are two types of DGR endorsement:

  1. entities that have DGR endorsement in their own right
  2. entities that are endorsed as a DGR in relation to a fund, authority or institution it operates. In this instance, only gifts to the fund, authority or institution are tax deductible

Some examples of the types of organisations eligible for DGR status include:

  • Public hospital
  • Community shed
  • Registered public benevolent institution
  • Public university
  • TAFE
  • Guides branch
  • Animal welfare charity

OUR TIP: For a full list of DGR categories, refer to the Australian Taxation Office’s Getting started as a not-for-profit, or go straight to the section titled 'Is my organisation eligible for DGR endorsement?'

To become a DGR, your organisation needs to fit the requirements set down in law and be endorsed as a DGR by the Australian Tax Office. There are some requirements you must meet before your not-for-profit can be endorsed as a DGR by the ATO.

Gaining and Maintaining DGR status

To apply for a DGR endorsement from the ATO, your organisation will need to:

  • Be a registered charity with the Australian Charities and Not-for-profits Commission (ACNC). This does not apply for ancillary funds or DGRs specifically listed by name in tax law
  • Have an ABN
  • Fall into a general DGR category or operate a fund, authority or institution that falls into a general DGR category
  • Where a public fund is operated, have responsible people who administer it. (Did you know, membership of the Institute of Community Directors Australia confers responsible person status? Learn more.)
  • Have acceptable rules dealing with the transfer of surplus gifts and deductible contributions on winding up or revocation of endorsement
  • Satisfy the gift fund requirements, if applicable, and
  • Be in Australia, or have the relevant fund, authority or institution in Australia.

Claiming Deductions

While not all gifts made to DGR organisations are tax deductible, the majority are. Tax laws state what types of gifts are tax deductible; for instance:

  • Monetary gifts of $2 or more
  • Property (including trading stock and shares) purchased by the donor in the past 12 months
  • Trading stock disposed of outside the ordinary course of business
  • Property (including shares) valued by the ATO at $5000 or less
  • Shares listed in a public company valued at $5000 or less held by the donor for at least 12 months
  • Cultural gifts*
  • Heritage gifts*

* may only be accepted by a limited number of DGRs

OUR TIP: The laws governing deductible gift recipient status are really complicated. Equip yourself with the basic information you need using the ATO’s Induction Package for Not-For-Profit Administrators or Justice Connect's DGR Tool but then see if you can find yourself a (preferably pro bono) lawyer to guide your organisation through the process.

You may also like...

Become a member of ICDA – it's free!