Seeking Deductible Gift Recipient (DGR) status is one of the most important steps that charities must take when they are setting up and registering with the Australian Charities and Not-for-profits Commission (ACNC). DGR status is great to have in place as it encourages people to make tax-deductible donations to your not-for-profit organisation. If you would like to have DGR status, it is important to understand whether it is possible in your circumstances and the process of obtaining it.
Is Being Registered as a Charity the Same as DGR Status?
Firstly, it is important to be aware that ACNC registration and DGR registration are two separate processes. Even if your not-for-profit registers as a charity, it does not necessarily mean it will have DGR status and vice-a-versa.
Even though the ACNC will collect information in respect of your application and pass this onto the Australian Tax Office (ATO) for DGR endorsement, they will not make the decision as to whether it will be approved or not.
You do not need to be first registered as a charity to receive DGR status. However, there are certain types of charities that must be a registered charity before receiving DGR status. If you are unsure, you should review the table provided by the ATO, which sets out the various types of charities and the requirements for them.
The ATO oversees the DGR status application process, and they approve or deny registrations for DGR status. To receive DGR status, you must fall first into a category that is set out in the relevant tax law. Second, you must check that you fall under either one of the two different types of endorsements – whole DGR endorsement or part DGR endorsement. Your charity might receive part DGR status because part of your charity, such as a particular operation you run, might be eligible for DGR status, but the charity or organisation as a whole is not eligible.
Requirements Once Status is Approved
In some circumstances where you have been endorsed in relation to a part of your not-for-profit, you may be required to set up a gift fund. A gift fund is a separate fund for the donations associated with that section of your not profit. In some circumstances a separate bank account is required to be set up. The gift fund can only be used for the “principal purpose” of the fund and not for any other purposes.
Once you are approved for DGR status, there are many regulations as to the type of gifts you can receive and how you can use these donations. There are also regulations regarding these donations you receive, if your charity is wound up or if the ATO revokes your DGR status.
You might also be able to apply for additional charity tax benefits if you are a public benevolent institution, health promotion charity or charity for the advancement of religion. If you have any questions about DGR status, how to apply for it and what you do if your application is denied, one of our specialist lawyers can help you with the process of registering your charity or not-for-profit organisation.