THE TAKEAWAY: 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 claim tax deductions for gifts to DGRs in their income tax returns, but 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.
Here’s how the Australian Government’s ABN website defines DGR status:
A deductible gift recipient (DGR) is an entity or fund that can receive tax deductible gifts. There are two types of DGR endorsement:
- An entity that has DGR endorsement in its own right
- An entity that is only 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 hospitals
- Public benevolent institutions
- Public universities
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.
Gaining and Maintaining DGR status
To apply for a DGR endorsement from the ATO, your organisation will have to tick five boxes. An organisation will need to:
- 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.
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, but then see if you can find yourself a (preferably pro bono) lawyer to guide your organisation through the process.