Philanthropy provides funds and other assistance for causes which promote health, education, assistance in times of natural disaster and other areas. There are many considerations when setting up a charity to advance education – such as the type of structure to set up (should you use a trust, or a company limited by guarantee) and dealing with the Australian Charities and Not for Profit Commission (ACNC).
One main consideration which every person setting up a charity has likely considered at some stage is getting endorsed as a deductible gift recipient (DGR) by the Australian Taxation Office. If you’re DGR endorsed, this means that people who give to your charity get a tax concession, and the thinking goes that people are more likely to donate to your charity, if they are eligible for a concession. However, achieving DGR is not simple – there are a number of hurdles to jump before the ATO will endorse you.
What Categories of Organisations Does the ATO Endorse?
There are 40 categories the ATO endorses for the purposes of DGR.
These are (in no particular order):
- Animal welfare charities
- Australian disaster relief funds
- Developed country disaster relief funds
- Necessitous circumstances funds
- Overseas aid funds
- Private ancillary funds
- Public ancillary funds
- Public hospitals
- Public libraries, museums and art galleries
- Public universities
- Registered health promotion charities
- Registered public benevolent institutions
- Scholarship funds
- School building funds
- Volunteer fire brigades
If you want to receive the benefits of DGR registration, your charity or organisation needs to fall within one of these categories.
Can My Educational Charity Receive DGR Endorsement?
‘Advancing education’ is a charitable purpose as defined by section 12 of the Charities Act 2013 (Cth). While your organisation may be able to be registered as a charity by the ACNC, this does not guarantee the ATO will endorse you for DGR status. This is because the types of educational charities and organisations that are eligible to receive DGR status are extremely limited.
The ATO states that the following educational charities and organisations can receive DGR status.
- Public universities
- Public funds for the establishment of a public university
- Higher education institution (e.g. a school, within the meaning of the Higher Education Support Act 2003 (Cth))
- Residential educational institution
- Commonwealth residential educational institution
- Affiliated residential educational institution
- TAFE (under the Student Assistance Act 1973 (Cth))
- Public fund for religious instruction in government schools
- Roman Catholic public fund for religious instruction in government schools
- Public fund for ethics education in government schools
- School building fund
- Public fund for rural school hostel building
- Government special school
- Scholarship Fund
- Life education company
This exhaustive list of education-related charities and organisations shows that it might be onerous for a charity whose purpose is to advance education to receive DGR status. Many of the organisations on the list are strictly defined by legislation – e.g. TAFE under the Student Assistance Act 1973 (Cth). Those who are relying on receiving DGR endorsement from the ATO to encourage charitable giving might have to assess their funding model, to broaden their source of income in case DGR endorsement is not an option.
In summary, while an organisation may be registered as a charity under the Charities Act 2013 (Cth) by the ACNC, this does not guarantee the organisation will receive DGR endorsement by the ATO. DGR endorsement means that any person donating to the organisation will receive a tax deduction – acting as an incentive to donate charitably. To be DGR endorsed, your organisation needs to fall within a number of strictly defined categories, and if there is a question about whether your charity falls within one of these categories, you should seek legal advice on your eligibility to be DGR endorsed.