DGR reform proposals
August 2018 | News | Libby Klein
The Commonwealth Treasury has outlined details of proposed changes to the rules for Deductible Gift Recipients (DGRs) in a Consultation Paper released on 22 August 2018. If enacted in law, DGRs which are not already registered as charities will need to take action, and those with multiple public funds may be able to streamline their arrangements.
The future of these reforms is uncertain following the changes to the federal government’s ministry last week. Kelly O’Dwyer, the former Minister for Revenue and Financial Services was sponsoring the changes. At the time of writing it is not yet clear which Minister will now have responsibility for these reforms.
Submissions regarding the proposed changes can be made to Treasury, by the closing date of 17 September 2018.
DGRs not already listed as charities
If the necessary legislation to implement the reforms is passed, all non-government DGRs who are not operated by a registered charity will need to register as a charity themselves between 1 July 2019 and 30 June 2020. Specifically listed DGRs may also have to register for charity status – with this to be decided on a case-by-case basis.
Eleven categories of DGR including public and private ancillary funds would be impacted as listed in the table shown at the foot of these notes.
Registering as a charity
There will be a streamlined process for obtaining charity status involving the provision of basic information to the ACNC and no assessment of eligibility. The DGR will then have the same ongoing obligations as other charities, including ensuring that it meets eligibility requirements. In other words, if the DGR is not eligible for charity status, it will not be able to take advantage of the streamlined process in order to circumvent eligibility requirements.
Not all DGRs are eligible for the streamlined process: if charity status has previously been refused or revoked, the DGR must apply for registration as a charity in the normal way, subject to full assessment by the ACNC.
Obtaining an exemption from the above proposed requirements
An exemption may be available in certain circumstances, including where the DGR has a non-charitable purpose, or is operated by an organisation that has a non-charitable purpose, and where an ancillary fund wants to continue to distribute to DGRs that are exempt from charity registration. Generally speaking, if it is possible to become eligible, for example by amending governing documents, the DGR must do so if it is to retain its DGR status.
Some examples are given of circumstances where an exemption will not be granted. These illustrate that it will not be possible to simply opt out of the requirement to register as a matter of preference.
Special arrangements will be made for DGRS which are granted an exemption, to ensure that they are subject to similar regulatory requirements as if they were registered charities. There will be no change to the reporting requirements for private and public ancillary funds.
Streamlining public funds
DGRs with multiple public funds will be able to consolidate them. The requirement for a majority of the management committee to have a degree of responsibility to the general community in the form of a recognised public office or position, will be abolished.
What you need to do
If you have responsibility for a DGR which is not also a charity, you should stay abreast of developments in this area and be ready to take the appropriate action if the proposed changes are enacted.
The full Consultation Paper can be found here.
The following DGR types will be impacted
Item DGR category description
1.1.3 A public fund maintained for the purpose of providing money for hospitals with DGR status.
1.1.8 A public fund established and maintained for the purpose of providing money for public ambulance services with DGR status.
2.1.8 A public fund established and maintained solely for the purpose of providing religious instruction in government schools in Australia.
2.1.9 A public fund established and maintained by a Roman Catholic archdiocesan or diocesan authority solely for the purpose of providing religious instruction in government schools in Australia.
2.1.10 A public fund established and maintained solely for providing money for the acquisition, construction or maintenance of a building used, or to be used, as a school or college by a society or association which is carried on otherwise than for the purposes of profit or gain to the individual members of the society or association.
2.1.11 A public fund established and maintained solely for providing money for the acquisition, construction or maintenance of a rural school hostel building.
3.1.1 A university, college, institute, association or organisation which is an approved research institute for the purpose of the ITAA 1936.
4.1.3 A public fund established and maintained for the purpose of relieving the necessitous circumstances of one or more individuals who are in Australia.
6.1.1 A public fund that, when the gift is made, is on the register of environmental organisations.
12.1.1 A public fund that, when the gift is made, is on the register of cultural organisations.
12A.1.3 A public fund which satisfies all of the following requirements:
(a) the fund is established and maintained by a non-profit entity;
(b) the principal activity of the entity is the provision of volunteer based emergency services that are regulated by a State law or a Territory law;
(c) the fund is established and maintained solely for the purpose of supporting the volunteer based emergency service activities of the entity.
Item 2 Public ancillary funds
Item 2 Private ancillary funds