In recent exciting news, the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 introduces a new class of Deductible Gift Recipient (DGR) charities. This Bill, introduced in September 2023, has passed both the House of Representatives and the Senate and is now nearing completion and awaiting royal assent.
What are the details?
The decision to grant DGR status to a maximum of 28 community foundations associated with Community Foundations Australia is being implemented, with some foundations like the Geelong Community Foundation, Stand Like Stone, and Australian Communities Foundation included. This decision was initially outlined in the October 2022-23 Budget, where the government committed to listing these 28 community foundations as DGRs. Subsequently, the 2023-24 Budget removed the time constraint for DGR status, thereby making it contingent upon continuous endorsement by the Commissioner of Taxation and adherence to newly established ministerial guidelines.
Why is this being introduced?
You might wonder why this new DGR category is being introduced. Couldn’t these community charities simply register for DGR endorsement under existing categories?
The reason is that community charity trusts and community charity corporations do not align precisely with any of the current DGR categories outlined in the Income Tax Assessment Act 1997 (ITAA). A single charity’s operations might encompass aspects of multiple categories, potentially extending beyond their scope. This poses integrity risks if this entity were to attain DGR status solely through specific listing.
Amendments to existing law
This Bill makes changes to the ITAA and the Taxation Administration Act 1953 (TAA).
Under the ITAA, a new general DGR category will be included for ‘community charity funds’. An entity may be declared a community charity fund by the Minister where it is a registered charity and has purposes consistent with existing general DGR categories, among other requirements. It also must comply with relevant requirements for registration and establishment. Additionally, several new definitions will be added into the ITAA to facilitate the expansion of the DGR regime to community charity funds.
This Bill also extends the TAA’s application to community charity trust funds. Under this regime, the Minister must make guidelines to set out the rules that community charity funds must comply with if the funds are to be endorsed as DGRs.. There is further explanation on administrative penalties, suspension or removal of trustees, transfers between funds, and registration on the Australian Business Register.
These changes do not confer DGR status automatically. The fund must apply to the Commissioner of Taxation for endorsement of this status, and compliance with new ministerial guidelines will be a condition of endorsement.
If you need help understanding your charity’s obligations, please get in touch with Warlows Legal today using the contact information below.
