All DGRs to be ACNC registered: draft leg released

Treasury has released exposure draft legislation which, if implemented, will require a fund, authority or institution seeking endorsement as a Deductible Gift Recipient (ie a DGR) to be:

  • an Australian government agency;
  • a registered charity; or
  • operated by an Australian government agency or a registered charity.

This is one tranche of a number of reforms to the sector that have been announced by the Government. Other reform measures which are not included in the draft legislation include:

  • the removal of public fund requirements for DGRs; and
  • transferring the administration of the 4 DGR Registers to the ATO and the ACNC.

The Government had much earlier released a consultation paper on the proposed reforms. It announced earlier in the year that the reform process would be slowed because of COVID. (The reforms were meant to have commenced on 1 July 2020.)

Proposed changes

The draft legislation is all about ensuring consistency. There is nothing new in it.

For a gift to be deductible, the fund, authority or institution must be covered by an item in any of the tables in Subdiv 30-B of ITAA 1997, or be an ancillary fund established and maintained under a will or instrument of trust for an entity listed in Subdiv 30-B.

There are 52 general DGR categories in Subdiv 30-B. Of these, 41 already require that the fund must be a registered charity, operated by a registered charity, or an Australian government entity (which is not capable of being a charity) to be endorsed as a DGR. This means that there are 11 categories (listed below) that allow for endorsement as a DGR where the entity is not a registered charity, operated by a registered charity, or an Australian government agency.

The legislation will amend the special conditions for these 11 general DGR categories. This will make charity registration a prerequisite for all funds seeking DGR endorsement under the general DGR categories. The stated purpose is to improve the consistency of regulation, governance and oversight of DGRs, while also reducing unnecessary compliance costs. For example, currently a few organisations are required to report both to the registrar (eg, registrar of the REO and ROCO) and the ACNC.

Categories of DGR to be amended

The categories are:

  • Health – public fund for hospitals (item 1.1.3 in s 30-20);
  • Health – public fund for public ambulance services (item 1.1.8 in s 30-20);
  • Education – public fund for religious instruction in government schools (item 2.1.8 in s 30-25);
  • Education – Roman Catholic public fund for religious instruction in government schools (item 2.1.9 in s 30-25);
  • Education – school building fund (item 2.1.10 in s 30-25);
  • Education – public fund for rural school hostel building (item 2.1.11 in s 30-25);
  • Approved research institute – approved research institute (item 3.1.1 in s 30-40);
  • Welfare and rights – public fund for persons in necessitous circumstances (item 4.1.3 in s 30‑45);
  • Environment – public fund on the Register of Environmental Organisations (REO) (item 6.1.1 in s 30-55);
  • Cultural organisations – public fund on the Register of Cultural Organisations (ROCO) (items 12.1.1 in s 30-100); and
  • Fire and emergency services – fire and emergency services fund (item 12A.1.3 in s 30-102).

Operative date

The amendments will take effect 3 months after the enacting legislation receives assent. However, there will be various transitional rules.

Submissions

Interested parties have until 4 December 2020 to make a submission.

This article was originally published in Thomson Reuters’ Weekly Tax Bulletin.

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Ian has worked at Thomson Reuters for over 15 years as a senior tax analyst with expertise in income tax and GST. He has been involved in tax publishing for over 25 years.

Prior to his tax writing career, Ian worked as a manager for a Big 4 accountancy firm and then with a firm which provided specialist tax advice for the music and recording industry.

Ian holds a Bachelor of Economics degree, is a Chartered Accountant and a registered tax agent. Among other things, Ian is the author of the Australian GST Handbook, the GST Commentary Service, the Australian Financial Planning Handbook and the specialist income tax commentary services, as well as being a regular contributor to the news services.

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