Is your charity tax deductible?

A charities’ most common question is whether they are tax deductible or not.

Having deductible gift recipient (DGR) status can be very rewarding and beneficial to a company. But, along with the benefits, there are several different compliance rules and ongoing obligations required to maintain and sufficiently insure your DGR status. This article will set out some of the basic, key requirements and compliance information for DGR charities:

  1. Benefits of having a DGR status
  2. DGR fund management and rules
  3. Rules with respect to receiving gifts as a DGR fund
  4. Tax deductible receipts

What are the benefits of DGR status?

  • DGR entities can issue tax deductible receipts to its donors, making it a more financially attractive charity.
  • Donors are likely to give greater amounts than they otherwise would to charities with a DGR status, due to the tax savings associated with their donations.
  • DGR entities can receive funds from certain grant makers and philanthropic bodies, which are only able to give money to organisations that have DGR status.
  • DGR entities have various tax concessions available to them – generally, a DGR entity is also entitled to a full GST concession on any purchase it makes.
  • Gifts to not-for-profit organisations are GST exempt.
  • Charities registered with the ACNC are exempt from paying income tax.

However, the above benefits also come with extra rules and require ongoing compliance with certain obligations for endorsement of a DGR status.

Deductible Gift fund management:

A Several rules apply to the use of DGR funds including:

  • A DGR fund must operate through an independent bank account
  • Donations are only tax deductible if they are donated to the DGR fund bank account and carry out the objectives of the DGR fund
  • Assets may only be distributed by a DGR fund for the purpose of advancing the charitable objects of the fund, and
  • If a DGR fund is wound up, surplus assets are to be distributed to a DGR fund with a similar purpose.

Receiving gifts:

There are also rules in place with respect to the receiving of gifts by a DGR fund:

  • A donation is only considered to be a tax-deductible gift if the donor transfers money or certain property to the charity and does not materially benefit from the gift
  • A minimum of $2 must be donated to claim a tax deduction
  • The donation of property may be considered a tax-deductible gift provided that the market value of the property exceeds $5,000
  • In the case of a gift being donated for more than one purpose, the donor is required to specify the extent to which the gift applies to the purpose of the DGR fund, and
  • The following are not considered gifts because the donor receives a benefit in return:
  1. Provision of a service
  2. Paying membership fees
  3. Purchasing items at a charity auction
  4. Purchasing raffle tickets, and
  5. Costs of attending a fundraising event.

Issuing Tax Deductible receipts:

A tax-deductible receipt is issued by the DGR fund in return for a tax-deductible gift. The following information must be included in a tax-deductible receipt for a gift:

  • The name of the fund to which the donation has been made
  • The ABN of the DGR fund, and
  • The fact that the receipt is specified as a tax-deductible gift receipt.

Warlows Legal are specialists in the Charity and Not-for-profit sector. If you are seeking to be apply for DGR endorsement or are already a DGR entity and require advice surrounding compliance obligations, we can help you. Get in touch with our expert team of charity lawyers today for all your charity advice and needs!

You may also be interested in

Need legal help?
Book your complimentary consultation today.

Email Call

CLIENT TESTIMONIALS

Cameron Deane

“The assistance provided by Harriet with reviewing and negotiating the terms of our building contract, which encompassed both a significant financial commitment and extensive amount of renovation work, was essential to providing us with peace of mind that our interests were covered legally at all times. Harriet's professionalism, attention to details and expertise in this field were beyond reproach and I highly recommend her services to anyone considering any building related work.”

Cameron Deane

Construction Client

“Harriet, can I just thank you for being so incredibly kind to us. Sean was right – you are amazing.  I wanted to try and express that in person during our meeting but it’s been such a difficult week I knew I would blub all over you if I started.  Never a good look – especially when you’re on the other end trying to juggle London and Kyrgyzstan! We really appreciate everything you have done (and are doing for us).  Without you, all we would have is a slowly imploding bathroom with a loadbearing wall that could collapse without warning. Gives me anxiety every time I think about it!”

Construction Client

Chanoch Serebryanski

“Very professional and easy to deal with. A real pleasure to use at a great value.”

Chanoch Serebryanski

David Cherny

“Highly recommend Warlows Legal. Harriet and her team were professional and supportive throughout, couldn't have asked for a better service.”

David Cherny

Chaim Korik

“Harriet and team took the time to listen to our needs and ensure we had all the contracts in a timely manner. Felt like working as a team!”

Chaim Korik

Sarah Chanah Sufrin

“Harriet really cares for her clients and works tirelessly to achieve the best result for them every time.”

Sarah Chanah Sufrin

Chaya Wolf

“Excellent experience with Warlows Legal. Harriet is personable, professional and of a very high standard. Would recommend to everyone seeking legal advice.”

Chaya Wolf

Avi Kluwgant

“My experience with this company has been an absolute breath of fresh air. I cannot recommend the legal services offered here enough. Thank you!”

Avi Kluwgant

MySmallHelp Australia

"I'm Matt from MySmallHelp Australia. I was looking for a friendly, trustworthy legal firm to set up the charity.  After talking with Harriet for a short time I found her to be knowledgeable and able to communicate fairly complex legal terms simple manner. Harriet and her team delivered exactly what they said they would in a very timely fashion. Warlows Legal team achieved these deliverable above my expectations. I can t recommend them enough. Thanks you so much for your help and guidance."

Matt Rai