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Changes proposed for DGR status and charitable giving rules

19/01/2024 02:34 PM

Changes proposed for DGR status and charitable giving rules

The Federal Government released a draft report that proposes policy reforms to incentivise philanthropy and increase outcomes for donors, charities and taxpayers.

Several reforms to the administration and oversight of organisations with deductible gift recipient (DGR) status also came into effect on 1 January 2024.

The Productivity Commission released a draft report reviewing philanthropic giving in Australia and recommended various reforms.

Tax deductible gifts and donations

Tax incentive for donating

Individuals who donate more than $2 to an entity with DGR status and have taxable income can claim a 100% tax deduction for their donation. The draft report found that a full tax deduction is an effective mechanism for encouraging donations and does not need to be changed substantially.

DGR-endorsed entities reform

The process for obtaining DGR status has been streamlined for organisations applying under 4 unique DGR registers

As of 1 January 2024, the ATO administers the total 52 categories under which an organisation may be eligible for endorsement as a DGR entity.

This reform is expected to reduce the time to obtain DGR status for organisations from up to 2 years to around one month.

Impact on education providers

The draft report outlines a number of concerns around school building funds, including its position that donors may be able to convert tax deductible donations to private benefits. Donations may reduce the cost of school fees. As donors are likely to have children at the school, this might be considered to be a private benefit. Accordingly, the Commission recommends that school building funds no longer be eligible for DGR status.

Impact on religious charities

If the draft report’s recommendations are approved, churches and other religious organisations that currently have a school building fund would lose their DGR status. The draft report also proposes to remove the DGR category for religious education in government schools.

Basic religious charities The draft report also proposes that the concept of basic religious charity be removed so that all charities are subject to the same ACNC governance and reporting requirements. This would mean that charities that are currently basic religious charities would be required to comply with the ACNC’s governance standards and provide financial information in their annual information statements. Depending on their size, they may need to submit financial statements that have been audited or reviewed.

Next steps

This report is currently in draft form and is open for consultation. We will keep you informed about any changes that are brought by the report once it is finalised.

In the interim, please reflect on the matters raised by this report and reach out to us if you would like to discuss further on how these proposed changes might impact you.

RBizz Team