Deductible gift recipients

Deductible gift recipients (DGRs) generally are approved by the Australian Taxation Office for organisations based in Australia. Once approved, you can give tax deductible receipts for money and gifts. If someone gives you $100 then that person (donor) can reduce their taxable income by $100.

The ATO endorses two types of DGRs:

1.  whole organisation (e.g. public hospitals and public universities)

2.  an organisation’s single fund, authority or institution (e.g. while a Local Council isn’t a DGR its library could be; or while a school isn’t a DGR its building fund could be)

However, you need to come within one of the categories. There are plenty of categories to choose from. They are contained in the tax acts. There are over 40 in all, including:

·         public universities

·         school building funds

·         scholarship funds

·         public benevolent institutions

·         necessitous circumstances funds

·         overseas aid funds

·         public libraries, museums and art galleries

·         public hospitals

·         health promotion charities

What if you fall within one of these categories – is that enough? Sadly, unless you are ATO “endorsed” then your donors cannot claim tax deductions. You need the two elements: you have to be worthy and the ATO has to agree you are worthy of giving out deductible receipts.

Why is religion not on that list?

Strangely, while we have got DGR status for a single person, “religion” of itself is not enough for DGR status. However, the good works that a religious organisation does can gain DGR status. These may include charity, health, education, schools, disaster relief, overseas fund aid, culture and libraries. For example, there is a Roman Catholic public fund solely for the purpose of providing religious instruction in government schools in Australia. One of my favourites is a Public fund for marriage guidance. This is maintained by a non-profit company solely for the purpose of providing money for providing marriage education under the Marriage Act 1961 to Australians.

There is an old but fascinating case where a religious Order’s sole job was to say prayers for sinners. The laws of the day said that was not of a sufficient charitable nature.

How do I get DGR status?

The process of gaining DGR status with the ATO is complex and failures are high. A failed attempt can prove fatal for any future attempts to get DGR status. The ATO seems to not want to give them out without a bit of a fight. Therefore, Brett Davies Lawyers as specialist tax lawyers are often chosen to make and support the application to the ATO.

Brett Davies Lawyers ensures that your public fund clearly sets out and reflects the purpose of the fund. Normally we set out your objects and rules in a separate founding document or incorporated into your constitution.

As the founder you invite the public to contribute to the fund. The public must in fact contribute to the fund to keep your status.

Recently, Brett Davies Lawyers set up a trust fund to benefit a man that suffered a crippling accident. The trustees are the work colleagues of the disabled man. Donations were sought from the public. It would not be enough that the only donors are the guardians and family members. To be a public fund it needed and received contributions from the general public – being predominantly his work colleagues and friends. That was sufficient.

What is the cost?

The first thing is to talk with one of our lawyers. We charge $440 for the hour of the first meeting. Generally, within the hour we can tell you whether you are likely to get the status – or what you need to do to get the status. Once we get the facts we normally fix fee the work. We only proceed if you are likely to get the DGR status. Costs normally range from $7,700 to $11,000.