Tax Deductible Gift Recipient Reform - Treasury discussion paper released

Tax Deductible Gift Recipient Reform

Daniela Chiew, Catherine Dean and Sally Whenman examine Treasury's proposals to strengthen governance arrangements relating to deductible gift recipients.

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On 15 June 2017, Treasury released a Discussion Paper which considers potential reforms to the tax arrangements for entities that are currently registered or are seeking registration as a Deductible Gift Recipient (DGR).

The Discussion Paper proposes measures to further strengthen governance arrangements applying to DGRs, reduce administrative complexity and ensure that an organisations’ eligibility for DGR status is up to date. With approximately 28,000 registered DGRs in Australia in 2017, these measures have wide application.

The proposed reforms do not alter the current eligibility criteria to be a registered DGR, which include being a not-for-profit organisation, having an Australian Business Number, complying with the governance standards set by the Australian Charities and Not-for-Profits Commission (ACNC), not having a disqualifying purpose and not being an individual, political party or government entity.

Specifically, the following measures are proposed:

  • All DGRs be required to be registered and regulated by the ACNC (with the exception of government entities, which cannot be charities and are therefore ineligible). This would impact approximately 8 percent of DGRs that are not currently registered charities, however it is anticipated that the majority of current DGRs would also meet the requirements to become a charity. 
  • The ACNC would help ensure DGRs understand their obligations, particularly in regard to advocacy. The consequences of a charity not meeting its obligations could include the revocation of their charity status, which would lead to loss of DGR status. 
  • Reducing complexity by transferring the administration of four DGR registers (the Register of Environmental Organisations, the Register of Cultural Organisations, the Register for Harm Prevention Charities and the Overseas Aid Gift Deduction Scheme), from four different government departments to the Australian Taxation Office (ATO), which could reduce the time for an organisation to be included on a DGR register from over a year to one month, and removing the requirement for a charitable DGR to maintain a public fund.
  • Ensure the integrity of the DGR system by having regular rolling reviews by the ACNC and/or ATO to ensure that each DGR organisation is still eligible for DGR status, for example every five years. One proposal is that specifically listed DGRs be subject to a sunset period for registration of no more than five years, after which they would need to reapply. DGRs may be required to certify annually that they continue to meet DGR eligibility requirements, with penalties applicable for false or misleading statements. Organisations found to be no longer eligible for DGR status would have their status revoked, and may lose some of their other tax concessions if their charity registration status is also revoked.

Treasury has invited submissions on the discussion paper which are due by 14 July 2017. In light of these proposed reforms as well as ensuring compliance with their current obligations, charities registered as DGRs should review their governance arrangements as a priority.

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