In the charity sector, the term deductible gift recipient (DGR) holds significant weight, as this special tax status provides an incentive to donors. People who give gifts or donations to organisations that are endorsed (registered) as DGRs can deduct the amount of these gifts from their income, which in turn affects how much tax they need to pay.
Only about 42% of registered charities have this status and you can check this by using the ACNC Charity Register.
Simply click the button in the top right corner labelled ‘will my deduction be tax deductible?’ when you are looking at the individual charity's entry on the register.
As a tax concession, DGR status is determined by the Australian Taxation Office (ATO) but charity status (what we determine) is, in most cases, the first requirement.
To streamline the application process, people apply to us first and, if they are also seeking DGR status, they can indicate that on our form and we can pass it through if they have the right charitable status – two Commonwealth agencies working together.
So why do we conduct reviews of DGR-endorsed charities?
We have funding to conduct reviews to check if DGR-endorsed charities already on the Charity Register remain eligible to be registered as charities with the ACNC.
Each year we assess around 500 DGR-endorsed charities. This is part of our Charity Register integrity work – work that we do to ensure the register is accurate and can be relied on by the public and other stakeholders.
To use our resources effectively, we focus on those charities that have a combination of higher risk factors, ones that have emerged over the last few years we have been conducting these reviews (our work is data informed).
As part of our commitment to share our insights back to the sector, the outcomes from our most recent DGR-endorsed charity reviews have been published on our website.
We have seen some important administrative discrepancies – ranging from inadequate governing documents to inappropriate charitable subtype registrations. Where we find issues, our first approach is to contact the charity to work with them to get things sorted out. There were some cases, however, where the organisation was found to not be entitled to registration.
There are a relatively small number of charities that come off the Charity Register (their registration is revoked) as part of these compliance reviews; last year it was 82. This supports the assertion that our risk-based selection is working; we don’t see it as pervasive non-compliance. For example, if an entity has ceased operating or is governmental in nature, these reviews will pick up that it clearly does not meet key charity registration eligibility criteria. Organisations often then chose to voluntarily revoke their registration.
So have a look at the summary we have published – a quick health check if you like.
A key and constant question for any board, regardless of charity size or intention to seek DGR endorsement, is whether your actions are furthering your charitable purpose. This includes maintaining the requirements associated with the charity subtype or subtypes your charity is registered with (for example, 'advancing health' or 'advancing culture').
You also have a responsibility to adhere to the ACNC’s Governance Standards and reporting obligations, including timely updates to governing documents or changes to your purposes. These things are essential to maintain registration as a charity and are also necessary for retaining DGR endorsement (for the vast majority of the DGR categories).
We offer support, including a self-assessment tool to help DGR-endorsed charities check if they are complying with the ACNC’s key registration requirements.
The ACNC’s commitment to yearly reviews underscores our dedication to maintaining public trust and confidence in the sector. By verifying the accuracy of charities’ details and providing guidance, we strive to uphold the integrity of the Charity Register and support the related DGR system.
I hope by sharing some of the common mistakes we see, you will better understand our work, as well as how to avoid making these mistakes yourself.
Warm regards,
Sue Woodward AM