Congratulations on considering setting up a not-for-profit organisation or a charity. This article discusses how you obtain deductible gift recipient (DGR) status.
This article is part 5 of a 5-part series to assist charities. Part 1 is to help you choose the right structure. Part 2 describes the legal documents that you need. Part 3 looks at registering with the ACNC. Part 4 described what is a Public Benevolent Institution, a health promotion charity and a religious charity.
What is a DGR?
An entity or fund that can receive income tax-deductible gifts and contributions is called a DGR. This is a tax exemption status granted by the Australian Taxation Office.
Members of the public who donate to an organisation with DGR status can claim tax deductions on their donation. The organisation can provide a tax deductible receipt.
To be endorsed with DGR status by the ATO, your charity must maintain a gift fund. This means that:
- all gifts and deductible contributions for the principal purpose of the organisation are made to it;
- any money received by the organisation, because of such gifts and contributions, is credited to it;
- it does not receive any other money or property;
- the fund is used only for the principal purpose of the organisation.
What is a gift fund?
A gift fund is a fund which is maintained and used only for the principle purpose of the fund, authority or institution. All gifts and deductible contributions of money or property for that purpose must be made to the gift fund. The gift fund does not receive any other money or property. The organisation must transfer any surplus assets of the gift fund to another gift deductible fund, authority or institution if the fund, authority or institution is wound up or the DGR endorsement is revoked.
How will your charity fundraise? Fundraising (licensing and compliance) is governed by both Commonwealth and State legislation. You must ensure that you obtain a license and comply with the Corporations Act 2001 (Cth) and applicable State laws. A charities lawyer can assist you with the license and to comply with both the national and state based laws.
If you would like to discuss the possibility of starting a charity, read the ACNC checklist that will help you take the correct steps before setting up your charity.
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