Treasury Laws Amendment (2021 Measures No. 2) Bill 2021 which requires non-government deductible gift recipients to be a registered charity was passed on 2 September 2021 and will have effect from 14 December 2021.
The measures were first flagged in late 2017 after Treasury released a discussion paper on potential reforms to the deductible gift recipient (DGR) framework early that year. These included requiring all DGRs to be registered as charities, integrating the 4 DGR registries such as environment, arts and culture and overseas aid into the ACNC registry system and removing the separate public fund requirement that some DGRs are required to adhere to.
In late 2020 Treasury released an Exposure Draft Bill, Explanatory Materials and FAQs relating to the Treasury Laws Amendment (Measures for a later sitting) Bill 2020 requiring all DGRs to be registered charities. https://treasury.gov.au/consultation/c2020-113633
This Amendment Act does not address all the initial issues, but it amends the taxation legislation to insert a precondition for DGR endorsement that the fund, authority or institution must be:
- a registered charity; or
- an Australian government agency; or
- operated by a registered charity or an Australian government agency.
Most DGRs will already comply with this requirement. The DGR categories that are most likely to be affected are:
- Health—public fund for hospitals (item 1.1.3 in section 30‑20);
- Health—public fund for public ambulance services (item 1.1.8 in section 30‑20);
- Education—public fund for religious instruction in government schools (item 2.1.8 in section 30‑25);
- Education—Roman Catholic public fund for religious instruction in government schools (item 2.1.9 in section 30‑25);
- Education—school building fund (item 2.1.10 in section 30‑25);
- Education—public fund for rural school hostel building (item 2.1.11 in section 30‑25);
- Research—approved research institute (item 3.1.1 in section 30‑40);
- Welfare and rights—public fund for persons in necessitous circumstances (item 4.1.3 in section 30‑45);
- Environment—public fund on the Register of Environmental Organisations (item 6.1.1 in section 30‑55);
- Cultural organisations—public fund on the Register of Cultural Organisations (item 12.1.1 in section 30‑100); and
- Fire and emergency services—fire and emergency services fund (item 12A.1.3 in section 30‑102).
It is estimated that the reform will affect less than 2,000 currently registered DGRs. These amendments do not affect ancillary funds or funds specifically listed by name as DGRs.
It is proposed that there will be a streamlined process to allow DGR applicants to lodge a single application with the ACNC seeking charity registration and indicating their intention to be endorsed as a DGR (or as a DGR for the operation of a fund, authority or institution). Once the ACNC is satisfied that the applicant is entitled to be registered as a charity, the ACNC will pass on the necessary information to the ATO to assess the applicant’s entitlement to DGR endorsement.
All DGRs will have 12 months after the legislation comes into force to comply and, in some cases, up to three years depending on the discretion of the ACNC Commissioner. A future regulation may prescribe the criteria for the exercise of the discretion.
Those with DGR status should establish whether the proposed legislation will require registration with the ACNC.
If registration is required, then preparation for the transition should begin as soon as possible to identify the process, which may include alteration of constitutions approved by members, that may be time-consuming.