Charities are governed by the Charities Act 2013 (Cth) (the Act) and for an organisation to be a charity, it must have a ‘charitable purpose’ as defined by section 12 of the Act. ‘Advancing health’ is a charitable purpose under the Act. DGR (deductible gift recipient) endorsement is attractive to many people wishing to set up a health charity. Anyone who donates to a charity which is DGR endorsed or otherwise endorsed by the ATO can receive income tax exemptions, and the charity itself can receive GST charity concessions, fringe benefit tax (FBT) rebates and FBT exemptions. This is a significant advantage if you’re trying to establish a charity from the ground up.
Australian Taxation Office Endorsement
The ATO doesn’t just endorse organisation for DGR status – the ATO also endorses organisations for the Tax Concession Charity (TCC) endorsement.
TCC is an endorsement where an organisation can access charity tax concessions (e.g. income exemption, GST concessions and FBT concessions.
DGR endorsement makes an organisation eligible to receive tax-deductible gifts and tax-deductible contributions. This means that the person or organisation who donated can claim a tax deduction on their income tax return.
DGR Endorsement
While your charitable health organisation might have a charitable purpose under the Act and be able to be registered with the ACNC, this does not necessarily mean it will be eligible for DGR endorsement with the ATO.
If you a charity which advances health, to receive DGR endorsement you must fall within one of the categories listed by the ATO as eligible for endorsement.
The categories are:
- Public hospitals
- Hospitals carried on by a society or organisation
- Public funds for hospitals
- Public authority for research
- Public institution for research
- Registered health promotion charity
- Public ambulance services
- Public funds for public ambulance services.
Is your organisation a public ambulance service? Is it a public fund for a hospital? The categories listed by the ATO as eligible for DGR endorsement are extremely limited. If you’re intending on setting up a charity and want to rely on tax deductible gifts receiving due to your DGR endorsement, you should assess your funding model to determine whether the charity has other funding options. As demonstrated by the list of categories, not every health charity can be registered for DGR.
Key Takeaways
In summary, an educational charity registered with the ACNC is not guaranteed DGR endorsement. Organisations such as public hospitals and ambulance services are eligible, but if your organisation falls outside these categories, then it might be difficult to receive DGR endorsement. Review your funding model to ensure that your charity can survive without receive either DGR or TCC from the Australian Tax Office. Receiving these endorsements should be a bonus, but should not be relied upon, if you are establishing a charity. Contact our charity lawyers if you have any questions about obtaining DGR status.