Deductible gift recipient (DGR) status: Is your organisation eligible?

Community groups want people to give them money. In general, people are more willing to give money to community groups if the government is willing to refund some of that money at tax time in the form of letting them subtract their donations from their taxable income.

For this reason, most community groups would like to be the kind of group to which the government grants this privilege – groups with deductible gift recipient (DGR) status.

So can your group get DGR status?

It’s complicated. It’s very complicated. Charity law in Australia is a maze of ambiguous legal precedents. If you’re a not-for-profit and you haven’t got DGR status yet, we’d recommend you get yourself a specialist lawyer – pro bono if you can, of course, but paid for if you can’t. It’s pretty well a cost of doing business.

Just to give you some background, though, for when you’re sitting in the lawyer’s office, here’s a rough guide.

You probably think that your organisation is doing good – that's why you’re involved in it on a not-for-profit basis. Fine, but that’s not enough. Only some kinds of doing good attract tax benefits. Is yours one of them?

Your first stop is the Australian Taxation Office (ATO) website, here. You have to bear in mind, though, that the ATO has no particular incentive to make it easier for organisations to reduce anyone’s income tax. It’s not easy to simplify this area, and they don’t try terribly hard.

Next up, have a look at the excellent online DGR Tool offered by Justice Connect.

In broad general outline, if you want DGR status:

  • You have to be a not-for-profit
  • You have to be a particular kind of not-for-profit; specifically, you have to have objectives that are pretty similar to those of the kind of groups that have got DGR status in the past, which are listed under various headings here
  • You have to be a charity registered with the Australian Charities and Not-for-profits Commission.

If you don’t qualify under those rules or fit those lists, you may still have another bite of the cherry. The Australian government has in its wisdom set up a number of schemes to get around their own laws. The rules say, for example, that you have to operate in Australia; if you don’t, however, you can still get your DGR status by signing up with the Overseas Aid Gift Deduction Scheme (OAGDS). Check these out:

If you’re not even able to squeeze under those headings, you may be able to get DGR status for part of your operations, as a separate fund, or you may be able to find another organisation that is a DGR to auspice your work.

If you are entitled to DGR status there is still a long list of procedures to follow and regulations about how you’re to operate, but we’re not covering them here. This is only a very general introduction.

Don’t take what we say as gospel. There are exceptions to every rule, and subtleties to every statement – but, to repeat, we’re not advising you to take on five centuries of law and precedent by yourself. Get a lawyer and be prepared to pay between $10,000 and $20,000 for the privilege.

And remember, when you do have DGR status, you need to ensure you don’t have mission drift. It is good practice to do an annual comparison of your current purpose statement and the purpose statement you submitted for your DGR endorsement to ensure you are still issuing tax receipts appropriately.

Oh, and DGR status isn’t the be-all and end-all. If you’ve got a convincing story, you should be able to persuade the public to donate to your cause anyway, and it’s often easier to tell a better story than it is to change the law.

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