MATT CRICHTON: Good afternoon everybody. Welcome to the webinar today.
It's the ACNC's webinar on Charity Tax Concessions and Endorsements and given that's the topic, of course we've got a special guest from our colleagues at the ATO. Mel Knight is here to present all her expertise on things charity tax. Afternoon, Mel.
MEL KNIGHT: Good afternoon. Thanks for having me, Matt.
MATT CRICHTON: That's all right; always a pleasure. Before we do get into it, just a few pieces of admin I want to run through. You can ask questions throughout the webinar using the navigation panel on the side there. We've got a couple of colleagues, Chris and Sarah who are ready to answer all your questions there in the chat throughout the webinar.
We will try our best to get to every question, but there are quite a few attendees here today, so if we don't get around to your question, we will endeavour to do so later on via email.
Also, if possible, can you keep the questions to a more general nature. If they get too specific it may be too difficult to answer in this format, and it may be best to give either the ACNC for charity-related matters, or the ATO for more tax heavy matters, a call to go through the specifics of your organisation's issues. And we will give out the numbers throughout the webinar to help you with that.
Also, if you're having some audio troubles, you may want to dial into the webinar. On the confirmation email you would have received upon registering there are some details there to do this; there's a phone number and then a code to put in. That's one way to fix any audio troubles you may be having.
And finally, at the end we have a very short feedback survey; it consists of only three questions and takes probably no more that 20 seconds to complete, if that. So, if you do have those 20 seconds, we greatly appreciate all the feedback we receive from the surveys at the end of the webinars. That would be wonderful if you could.
Okay, with the admin out the way, let's get into the presentation proper.
Here's what we'll cover today. First, we're going to have a look at the basic charity tax concessions, what they are and what they entail.
We will touch on how the ACNC and the ATO, as agencies, work together, because they are – of course, we share some roles in this broader field, but of course, there's specific roles for each agency and sometimes it can be a little bit confusing to think about which one you have to go to for which issues and which applications.
We'll look at deductible gift recipients and deductible gift recipient reforms, and we'll have a look at specific topics of Health Promotion Charities and Public Benevolent Institutions.
And following that, we will have a Q&A session at the end, whereby we can answer some of the questions that are coming through during the webinar, the ones that we feel may have broader use for more attendees and we think would be worth covering for you all today.
The first part today is having a look at charity tax concessions.
So, let's clarify at the beginning, the ACNC is the national charity regulator and does register organisations as charities. Now, where this touches on tax concessions is that charities must be registered with the ACNC, or organisations must be registered with the ACNC as charities to access Commonwealth charity tax concessions from the ATO.
So, the ACNC has a role in registering an organisation as a charity, based on the charity's activities and purposes. And then, it's up to the ATO to look at the charity tax concessions.
Importantly – and we'll get into some of the details here – some tax concessions are only available for particular types of charities. So, if you think about it as a bit of a two-step process, the ACNC has a look at the charity part and the ATO endorses for tax concessions.
Some of the tax concessions depend on the type of charity that your organisation can be registered as. I'll pass on to you, Mel, to just give an overview of the ATO's role in this, given that I've just explained how the ACNC – which is where I work – looks after the charity registration aspect of it. What's the ATO's broader role?
MEL KNIGHT: You've made a really important point there about charities and them needing to be endorsed by the ATO.
Our role is administering tax concessions for charities, and I think really importantly, charities don't have to be registered with the ACNC, if you've got a charitable purpose, but any organisation with a charitable purpose has to be registered with the ACNC and endorsed by the ATO to access those tax concessions.
So, you're not able to self-assess them; you have to go through that registration and endorsement process. After the ACNC has decided on your charity
registration, you probably would have noted that on your application form you can indicate whether you want to be endorsed by the ATO.
The ACNC will then pass on your details to the ATO and we'll go through a process of assessing your application.
So, for most of those charity tax concessions, it's an administrative process. Our staff will go through and make sure that you're entitled and then give you a ring to let you know that they've been endorsed, and you'll get a notification from us.
There are some special conditions for particularly deductible gift recipient endorsement, and we'll get into that in detail, I think a little bit later, Matt, but you may need to meet some other requirements. And basically, we work together with the ACNC to make it as seamless for you as possible to get that application through both agencies.
MATT CRICHTON: I forgot the third dot point there; people can see on the screen now. Sorry about that. There may be conditions for certain tax concessions. And, as Mel said, we'll get into some of that later. There is a web address there on the screen, ABN Lookup: abr.business.gov.au.
The relevance of that is that you can look up the ABN of an organisation and see if it is endorsed for certain tax concessions. It doesn't, from memory – Mel, you can correct me if I'm wrong – it doesn't go into the specifics of every tax concession, but it does say that it is endorsed for charity tax concessions as a sort of [overtalk]
MEL KNIGHT: That's right.
The ABN lookup – and I think it's good too, if you're unsure about what tax concessions your organisation is already endorsed for, the ABN lookup is the source of truth for that.
It will show you if you have income tax exemption, if you have any FBT – Fringe Benefits Tax concessions, GST concessions, and also if you've been endorsed as a DGR.
The one bit of detail that it doesn't go into is the category that you might be endorsed for, unless, of course, you're an ancillary fund or a Public Benevolent Institution.
MATT CRICHTON: Now, just a brief overview of the working together. We have touched on a fair bit of this, so I think we can probably race through these points pretty quickly.
Mel did mention that organisations can apply for charity tax concessions when applying to register with the ACNC.
So, that means when you're filling in your application form to register the organisation as a charity with the ACNC, using the ACNC's form, there's a section in there to be able to apply for tax concessions too.
It's just a way to make the process a little bit simpler in that you don't have to then go to the ATO once the charity stuff is done; rather, we will pass on the information to the Tax Office once we have decided whether the organisation is registrable as a charity. But Mel, the third dot point here, that's the general way things go, and, I suppose, the easiest way.
But there are cases whereby a charity may need to go to the ATO separately, right?
MEL KNIGHT: Yes, that's right. We mostly see this if organisations, perhaps after they've established, they might want to apply for a Deductible Gift Recipient category.
Or if they're starting to do new work and they become eligible, they can come directly to us if they're already registered as a charity.
We've got information on our website, and the forms that are available and where to send them, are there.
MATT CRICHTON: Now into some of the details of the charity tax concessions. We did mention that there are specific categories of DGR. I know lots of people attending today are interested in the DGR stuff, but first, before we get to DGR, we will go over the – I suppose we'll call it the standard suite of charity tax concessions that are offered to organisations that simply registered as a charity.
Let's have a look at them one by one. Mel, the first one, income tax exemption – can you just give us an overview of what that is, and practically, what it means for an organisation?
MEL KNIGHT: It is exactly what it says. It is an exemption from income tax, and charities that have been endorsed by the ATO as income tax exempt do not need to pay income tax on their statutory or regular income that they receive.
And it also means that they have no obligation to lodge an income tax return with us. It's the big one.
MATT CRICHTON: Yes, of course. It makes a massive difference.
The second one here, we'll get into some of the more complicated aspects now. Goods and Services Tax concession. Can you, again, give us an overview of what that means, and practically, how it works for a charity?
MEL KNIGHT: I think there's a bit of misconception around this concession. It doesn't mean that you are exempt from GST or that you don't have to collect or pay GST.
What it is is a suite of concessions, really depending on what you do. I can give some examples. There's the GST concession might mean that if you conduct a raffle, there's no GST on those things. It also means that any gifts or donations that you receive, there's no GST on them.
So, it's about certain supplies that you make, and perhaps concessional treatment for the way that you calculate GST. Another big one is input taxed supplies for perhaps school tuck shops or uniform shops.
And then, also the ability to treat fundraising events as input taxed supplies. So, it's quite complex.
We have a lot of really good information on our website about the different parts of that concession.
What it does mean, though – because it's not an exemption from GST – if your charity has a turnover of greater than $150,000 you're still required to register for GST.
MATT CRICHTON: Important point, that one. I think a lot of people might not have realised that.
And of course, as we get into some of the more complex things here, it is worth reiterating that we may not be able to go into the specifics of how it applies to your charity in the live chat with some of the questions.
So, if you do have some specific questions about how this applies to your organisation, it is worth giving the ATO Not-for-Profit line a call.
And that line – Mel, this is right, isn't it – it goes straight to the team that deals with not-for-profit stuff, right? It's the first step in the tax call centre?
MEL KNIGHT: Yes, that's right. It's our little team. We do all the endorsements; so, concessions, and provide advice.
So, when you call that number, you're getting straight through to one of our Not-for-Profit Team.
MATT CRICHTON: I don't have it on the screen now, but I may as well give it to you. If you've got a pen there, everyone, it is 1300 130 248. It does show up later in the webinar, but I suppose it's worth jotting down now if you want to give them a call.
Let's move on to the next one, another one that could get a bit complicated, Fringe Benefits Tax. And importantly, at the end here, we've got two words: a rebate or an exemption. Once again, over to you Mel. What is this and how does it apply?
MEL KNIGHT: How does it apply. And we are going to talk about Public Benevolent Institutions and Health Promotion Charities in detail in a couple more slides.
But these are the two levels of FBT concessions that are available. The FBT rebate is available to all charities, except for the Public Benevolent Institutions and Health Promotion Charities.
The rebate is essentially a discount, I suppose, is the easiest way to describe it, on the Fringe Benefits Tax that your organisation would have to pay if you're providing fringe benefits to your employees.
So, it's a discount. Whereas the exemption actually – if you're entitled to that – allows you to provide Fringe Benefits Tax exempt benefits to employees, up to capped limit.
MATT CRICHTON: Just quickly, what are some of the benefits that commonly fall under this category? When you say 'benefits to employees', what might it entail?
MEL KNIGHT: A lot of employers, not-for-profits that are employers, they might provide a salary package to their employees where they can forego part of their salary and maybe have a car or have part of their expenses paid.
It's part of their salary package that they do.
It might even come down to paying for school fees for your children, or your mortgage repayments; a whole host of things can be salary packaged; there's really no limit on it.
MATT CRICHTON: Last one here, I'm going to listen carefully because the words don't mean much to me either, but a refund of franking credits. Can you give us an overview of what this means?
MEL KNIGHT: This is a really generous concession that's available to registered charities that are endorsed as income tax exempt.
What it does, if your charity has investments in shares and you receive franked dividends, it enables you to claim a refund of those franking credits on an annual basis.
Most people would do that through their tax returns, but because charities don't need to lodge a tax return, they're able to claim this refund of franking credits. So, it applies to charities that hold share investments.
MATT CRICHTON: Okay. And I suppose this is something that lots of people might not think about for their charity. Some of the other concessions are a little bit more obvious, or even stuff that pops up more readily, but this is one that people may not have considered.
Let's have a look at the big one now, the Deductible Gift Recipients, because I know a lot of people here are interested in this topic.
Firstly, Deductible Gift Recipients are a special type of charity tax endorsement and, as it says on the screen, a charity endorsed as Deductible Gift Recipient can receive tax deductible donations, which means that if a donor gives some money, then that donor can claim back that donation on their personal taxable income when they lodge their tax return, in the next one that they lodge.
It's a very – I suppose it's desired by lots of charities because, obviously, it can offer the incentive to get donors to donate more money, but it is limited in its scope.
It's not that – an important point here – not every charity is entitled to do this; not every charity is automatically endorsed as a Deductible Gift Recipient. It is a special category, and as the last dot point says here, the ATO has different categories of DGR, each with its own eligibility requirements.
Mel, do you know off the top of your head how many different categories there are? Because it ranges quite widely, doesn't it?
MEL KNIGHT: Yes, I do, because I have to count them all the time. There are 50 different categories, Matt. And as you've said, they all have their own individual requirements.
Some examples are animal welfare charities; and obviously, we know Public Benevolent Institutions is one category; school building funds; public libraries; public museums.
There's this whole list of categories, which we have details for them all, but it's really important to know that you have to meet the specific requirements of this particular category for us to be able to endorse you.
MATT CRICHTON: And as it says on the screen here, not all charities are eligible for endorsement as a DGR.
And in fact, less than half of registered charities are endorsed as DGRs, which gives you an indication of the different level from your regular charity tax concessions, which requires just registration with the ACNC as a charity; this one is limited to a certain type of charity.
An important point here – again, it's worth reiterating – the DGR endorsement is decided by the ATO. So, although there is a strong link between the two agencies, given the role the ACNC has in deciding charity status or the type of charity that your organisations can be registered as, the DGR endorsement itself is still a matter for the ATO, right, Mel?
MEL KNIGHT: Yes, that's exactly right.
MATT CRICHTON: Just on that, although the ACNC decides on the charity aspect of it, does the ATO also do its own look at the charity aspect, or is the DGR endorsement, does that take the ATO's decision as final on that charity type?
MEL KNIGHT: That's a really good question. The ATO does take the ACNC's charity decision and your registered sub-type as the final decision for charity purposes.
And then we are just looking at what your organisation does, and how you then fit into the DGR requirements for whatever category you're applying for.
MATT CRICHTON: Just one more question – this actually popped up in a few things we've done on this topic – is the whole or part DGR concept. I think there has been some confusion about that in the past.
Is that still possible for a charity to be endorsed as a DGR in part, or does the charity have to be endorsed as a DGR as a whole?
MEL KNIGHT: It depends on the category. A good example might be a school building fund that's operated by a religious organisation.
So, the religious organisation itself, there's no category for the advancement of religion, but they may be able to be endorsed in part for some of the activities that they do. So, a religious organisation may be able to have a school building fund endorsement if they're operating a school, or they might have a necessitous circumstances fund.
So, there's the opportunity with some of the categories for us to endorse you for part of the activities that you do.
MATT CRICHTON: And of course, that does depend on the type of charity that your organisation is, and what it does.
And just finally, a fourth point here, DGR reform: measures before parliament. Mel, can you give us a bit of context for this one?
MEL KNIGHT: You may or may not be aware, there was a suite of DGR reforms that was announced back in 2017, and part of those reforms is actually progressing and is before the Parliament at the moment.
And that particular reform is one that requires all existing DGRs to be registered as charities. We're waiting for that to go through Parliament, and hopefully we'll have some more information for people soon.
If you're already registered as a charity and you're a DGR, it has no impact. It's only an impact for those existing non-government DGRs that are not already registered as charities.
MATT CRICHTON: Mel's right. As this progresses, there will be more information coming from the ACNC, the ATO and relevant DGR registers too, as we move through these reforms.
Which brings us to Government DGR registers. You may be in an organisation that has DGR via one of these registers.
There are four DGR registers that endorses charities, organisations, based on what they do for DGR. The ATO registers, sorry, endorses the DGR. But the four Government registers are: the Register of Environmental Organisations; Cultural Organisations; Harm Prevention Charities; and the Overseas Aid Gift Deduction Scheme.
So, the final thing here, Mel, one more that you might be able to give some context to everyone, is the plans to harmonise these registers. Is that part of the DGR reforms you mentioned that were announced in 2017?
MEL KNIGHT: It is part of those reforms, but as of yet, there's been no movement from the Government to progress them. It's still on the books, so to speak.
But if charities are wanting to still apply for DGR under these categories, they should continue to do it with the established process, that is, applying directly with the Registers.
And these are the only four categories that the ATO doesn't administer, so the relevant Government department will look at an application and make a decision whether or not they're entered onto those registers, and then it comes to the ATO for DGR endorsement.
MATT CRICHTON: If you are Googling any of these, I would encourage you to type the word 'deduction' accurately. I'm not sure how that 'A' got in there, but 'deducation' probably isn't going to show up in a Google search!
On to the two special categories of charity, which are important because they come with their own DGR category.
So, if the ACNC registers an organisation as one of these two, then it is likely to be endorsed by the ATO for Deductible Gift Recipient.
Health Promotion Charity, often referred to as an HPC, or a Public Benevolent Institution. So, again, first the ACNC decides on whether or not your organisation fits these categories, and then will give the registration as one of these charity types before passing it on to the ATO to endorse the DGR.
Before the ATO will endorse, there are a couple of little checks that must be done, but it is important to note that the ACNC looks at the charity aspect of this, of course, and then the ATO looks at the tax part.
If we just go through some of the important aspects of both of these, because it is worth taking some time to clarify.
And then I'll ask Mel – Mel, I'll get you to explain what's required to properly be endorsed, once you are considered one of these charities.
But first, if we look at Health Promotion Charity, it's important to note that a Health Promotion Charity is a particular type of charity that has a special meaning, and it is an institution whose principal activity is to promote the prevention or the control of diseases in human beings.
It's a bit of a mouthful, but the point, though, is that it must – it probably requires more than just say a charity that could be registered with the purpose of generally advancing health.
Health Promotion Charity, despite its name, does need to be an institution with a principal activity of promoting the prevention or the control of diseases in human beings.
So, it's a bit of a larger hurdle to jump than just simply advancing health. For example, organisations that may promote general health and wellbeing are unlikely to be registered as a Health Promotion Charity because there isn't that explicit focus on prevention or control or treatment of diseases in human beings.
So, that's the thing to focus on here, if you're thinking your organisation may be eligible for this category, it really does need to have a principal activity of that focus on a disease in human beings, rather than just general health, promoting general health and wellbeing.
The name is a little bit misleading because, as the name suggests, Health Promotion Charity sounds like it is just generally promoting health. It is a little bit of a higher bar than that.
A Public Benevolent Institution, similarly, is a special category too.
This one is an organisation that again, is an institution with benevolent relief as its main purpose.
And importantly, that relief is provided to people in need, in recognisable need. So, this goes into more details on our website, about what does it mean to provide benevolent relief, what does it mean to provide to people in need.
It's worth having a look at that, and there's detailed fact sheets that we will send out in the follow-up email after this webinar, that it's worth going through if you think either of these charity categories apply to your organisation.
If you are registered as one of these, the good news is, your organisation is probably going to be endorsed as a Deductible Gift Recipient. Now, what are the other – if there are any – special requirements for a Health Promotion Charity or a Public Benevolent Institution to be endorsed as a DGR, and then, if they are, what are the benefits that they get for that?
MEL KNIGHT: This is – two special categories, I think. As you've said, there's quite a high bar that you need to pass with the ACNC, but as soon as you're registered under those charitable sub-types, you come to the ATO and you need to make sure you have a DGR winding up revocation clause in your governing documents, and then you'll be eligible for endorsement as a Deductible Gift Recipient.
So, rather than the ATO assessing your eligibility in a category, that assessment has already been done, the hard work, by the ACNC, and it just comes to us to check off that you have the right clauses in your governing rules.
And that's it, basically. The benefit of these two categories is they both – they provide you with the ability to receive tax deductible gifts, and also for that quite lucrative Fringe Benefits Tax exemption.
So, it basically means that you can provide exempt benefits to your employees up to a grossed up capped limit of $30,000 per year per employee. So, it is quite a good benefit.
MATT CRICHTON: I've just sent a link to everyone there in the chat, so if you do have a look at your navigation panel there, that's the fact sheet for Health Promotion Charity, and I'll add the fact sheet for Public Benevolent Institution too.
One thing that's worth pointing out now is on the screen here, the first dot point, that registered charities can apply to change their sub-type – a sub-type is the type of charity that you are registered as, your organisation is registered as – through the Charity Portal.
This means that if your organisation is already registered as a charity and it's not one of these categories, but you think it might be eligible, have a look through those fact sheets, see if it meets the eligibility criteria, and then you can apply to have it registered as one of these charities.
And, if in fact it does meet the criteria and it can be registered as a Health Promotion Charity or a Public Benevolent Institution, then the same processes will apply; the info will be passed on to the ATO and a DGR endorsement following that, all things being equal.
So, have a look through the fact sheets, apply through the Charity Portal if you think that will be suitable for your organisation.
Okay, we'll move on to the next one, questions. That's the presentation – or the formal presentation today.
We've got quite a few questions that have come through, and a few that I think will be useful for everyone, because there are some common themes that have popped up here.
So, we'll have a look at – Mel, I think you're going to be in the hot seat for many of these, given the nature of them with tax.
We've had a few questions about the practicalities of issuing a tax receipt, actually. Can you give us a quick overview of what does a tax receipt need to say, what information does a charity need to put on a tax receipt, presuming the charity does have DGR endorsement and they want to make sure that the donor can claim back that donation on their income tax.
MEL KNIGHT: At a really high level, the way the tax legislation works, there is actually no requirement, no legal requirement for you to issue a receipt for gifts that you receive, but it's good practice and it actually helps your donor to substantiate their tax deduction.
But if you do issue a receipt there are some requirements that you have to meet and they are that you need to have the name of your organisation, you need to put your Australian Business Number and you need to include a note that the receipt is for a gift, and obviously you'd have the amount that the gift is for.
And what you can also include, obviously the amount of money that was donated or a description of the gift, it was property that you received, and the date that it was given. So, they're the key –
MATT CRICHTON: It's good for the donor to have that, of course, because if they're claiming back some stuff on their own income tax but can’t substantiate it because the charity never issued a receipt, that spells a bit of trouble.
MEL KNIGHT: Yes. But other things that donors can use, Matt, if they've given you a donation and it's been from a bank transfer, the donor might have records, their bank records and things like that.
So, it's not an absolute legal requirement for you to issue one, but it is a legal requirement, if you choose to issue a receipt, that you have the name of your organisation, your ABN and some information that it is for a gift.
MATT CRICHTON: Right. Couple of questions again about GST, so I think it might be worth clarifying a few points here.
Can a DGR reclaim the GST it pays on certain things? Another question about whether charities should include GST. So, it might be worth clarifying how the GST concession works. It's not an exemption, is it?
MEL KNIGHT: No, it's not an exemption. I think I'll just go back and reiterate that point that if your charity has a turnover of more than $150,000 you must be registered for GST.
We've got a lot of information on our website about how you work out what's included in that turnover calculation, so I'd recommend going and having a look at it.
But basically, if your organisation is registered for GST, then you will need to charge GST on certain supplies that you make, and you'll be able to claim back the GST that you have been charged to make those supplies.
So, that's the key thing. If you're registered, you can claim GST, but you will also need to charge GST.
Now, when we’re looking then about charging GST, that's where these GST concessions come in and, depending on the type of supplies that you might make, there may be some concessions to help you with the amount of GST that you actually need to charge on your supplies. It's complex.
MATT CRICHTON: It's complex. And if you're struggling to figure out how this applies specifically to your organisation, then please give the ATO's Not-for-Profit Team a call; they will be able to help you out with the specifics of your organisation.
That number, again, was 1300 130 248.
A few questions about managing funds here. Do DGR funds need to be kept separate from other funds a charity received; can DGR funds only be used for specific things; are some of the questions we've received.
So, maybe another complex one, Mel, but could you clarify any details about keeping DGR funds separate from other funds?
MEL KNIGHT: This is where – you know how you asked me earlier about whether or not organisations are endorsed in part or as a whole – that actually makes a big difference to how your funds need to be treated.
So, if your organisation is endorsed in part – sorry, I'm getting a bit of feedback, I don't know whether you're getting that on your end? But if you're endorsed in part, then there's a requirement to tax as a DGR that you actually maintain a gift fund that quarantines those gifts so that they're only used for a specific purpose.
So, if I go back to that example that I gave you about a religious organisation that might then be operating a school building fund, those DGR funds cannot be used for the advancement of religion at all, and they need to be quarantined in a gift fund that is only used for school building fund purposes.
So, it really depends on how your organisation is endorsed as to how you would keep them.
A lot of DGRs tend to keep those deductible gifts separate anyway, just for record-keeping purposes. But if your organisation, say is endorsed as a public benevolent institution, then there's no requirement to keep the gifts separate from the rest of the organisation's funds, and you can use those DGR funds for all of your purposes, because you're endorsed as a whole.
I hope that explains it.
MATT CRICHTON: Yes, that makes sense, and I can see how the part endorsement or the whole endorsement really does make a difference with how the funds need to be managed.
MEL KNIGHT: The key thing is that you can only use your DGR funds for the purpose that you have been DGR endorsed for.
MATT CRICHTON: Right, good way of thinking about it. FBT keeps popping up in the questions as well.
A couple of the more practical aspects of it, a question about eligibility for staff: are all staff eligible for salary packaging and other benefits? Or is that only allowed with an exemption? Does the rebate come into play here?
MEL KNIGHT: Yes and no.
Obviously, if you've been endorsed as FBT exempt, so, for Public Benevolent Institutions or Health Promotion Charities, for most organisations that means that all of your employees are doing those work and it even applies to office and administrative staff.
The only time that that gets complicated, I think, is historically there are some organisations that are only endorsed in part for their PBI activities. So, it can't happen now, with new entities, but it's like a historical thing.
Those FBT exemptions do need to be quarantined to the PBI staff as such; and it's the same for public hospitals, not-for-profit hospitals, that FBT exemption is obviously only available for staff that are directly involved in the provision of that hospital service.
So, there are some tricky little things, and I think if you need some further clarification about your particular circumstance, your best bet is to give us a call at the ATO and we can talk through that with you.
If you're accessing, or you've been endorsed for the FBT rebate, basically it applies to all of your employees, but remember, it's not an exemption, it's merely a discount.
So, for a lot of organisations that are endorsed for FBT rebate, it's still going to cost you, there's still an FBT Fringe Benefits Tax obligation for you.
So, that's something that you'd need to weigh up as an obligation, and a lot of organisations that do provide that rebate actually ask for contributions from their employees.
So, it can become quite complex; it's something that, financially, your charity would need to weigh up whether you are going to provide those benefits to your staff.
MATT CRICHTON: One last question. Actually, we'll go two more. A quick one here: someone's asked what's the difference between DGR1 and DGR2 status, and any particular requirement?
MEL KNIGHT: Good question, always comes up. DGR1 and 2, the main difference is DGR2s are ancillary funds. So, public and private ancillary funds, these are special DGR categories, and they are funding trusts only. They don’t do any activities except for pay money out to Item 1 DGRs. And Item 1 DGRs are basically all of your doing DGRs.
So, they're your Public Benevolent Institutions, they're your animal welfare charities, your public libraries, all of the other categories that we have are Item 1 DGRs.
And the reason we've got those different is that the ancillary fund categories, private and public ancillary funds, can only give money to Item 1 DGRs and they can't give money to themselves, like between Item 2 to Item 2. So, that's really what that difference is. Item 2 are ancillary funds, Item 1 are pretty much every other DGR.
MATT CRICHTON: Pretty clear explanation there. The last one –
MEL KNIGHT: Can I throw one little curly bit, so there are a couple of DGR categories, public museums, galleries and libraries, that are Item 1 and Item 4, and that Item 4 just enables them to receive gifts through the Cultural Gifts Program.
So, there is another item, Item 4, but it only applies to the galleries, museums and libraries.
MATT CRICHTON: I was just thinking that it was too simple!
Okay, the last one that we'll do before we let you all go. Everyone's giving up their lunch break to spend time with us, so I'm aware of the time and we'll finish up soon.
This one will touch on both charity aspect and tax stuff. Someone's asked about – actually, a few people have asked about the size of their organisation and the DGR; how big do they need to be? We're not big enough to be a DGR, that sort of thing.
So, to clarify a couple of aspects there, I'll just touch on the Public Benevolent Institution/Health Promotion Charity bit. There's no size requirement as such, but in being eligible for either a Public Benevolent Institution charity or Health Promotion Charity, the organisation has to demonstrate that it is an institution.
This is a little bit tricky and can get complex, but an institution is more than merely a fund, and broadly speaking, it's an establishment, an organisation that's instituted for the promotion of some object and it is – I suppose the shorthand for it is that it's more than a fund.
So, it has activities, it does stuff. This may be tricky for a new organisation to show that they're an institution, but it can help to demonstrate through – the charity can help demonstrate that it is an institution through things like business plans and strategies and things like that, in lieu of there not being an extensive history of having undertaken work.
So, the short answer to that is there isn't a size requirement in particular for the charity aspect of things, but it does need to – for those two categories, I mean – it does need to demonstrate that it is an institution.
If you want to have a look at more of that aspect of it, again, in the chat there, those two links to the fact sheets about HPC and PBI go through this in a little bit more detail.
Now, the size question for tax concessions, Mel, is there a requirement to be endorsed as a DGR – do you have to be a certain size?
MEL KNIGHT: Very broadly, no. And it's all about your purpose and your activities, and how you fit into the description for each of the different categories that we have.
So, the basic answer is no. There is only one category where there's a size restriction, and that is the Register of Environmental Organisations. So, at the moment, the way the legislation is written, there's a requirement that Registered Environmental Organisations, they need to have a minimum of 50 members.
So, that is the only category where there is some sort of size restriction that actually goes back to your membership. All of the other DGR categories, it comes down to your purpose and your activities, and do you meet the requirements as have been described in the category.
MATT CRICHTON: Excellent. Well, I think we're pushing 12:50 now, in some states. I'm sure the time is different, depending on where you are in the country.
So, we're going to finish up. There are some resources here that we thought might be useful. If you don't have a pen to jot these down, it's all right; we're going to send a follow-up email to everyone who registered for the webinar later today, I think; if not, early tomorrow morning.
And that will have all these links in there, but there's a few important resources there that'll be useful for this topic: tax concessions, DGR, HPC, PBI and the Charity Register, of course. ATO resources, Mel, this is where people can find much of the stuff that you've spoken about today, if they want to take the time to read through the content there.
MEL KNIGHT: Yes.
And it is – I just think the not-for-profit tab on the ATO website has a really great menu there, and it's divided up into those getting endorsed; we have information about the DGR tables; we have information about all the tax concessions that we've talked about.
And then, if you still need to have a chat, you can always give us a call on our phone number.
MATT CRICHTON: Okay. And that wraps things up for today. Please stay in touch. We've got our Commissioner, Gary Johns who writes a column monthly for our email subscribers. You will be getting that anyway, if you're registered as a charity.
We have lots of web guidance, video content, podcasts on the website, and webinars, of course, like this. So, look out for the upcoming webinars, register for the next one.
If you have any questions about your charity and issues in each charity – the charity aspects of its operations, rather than the tax stuff – give us an email at email@example.com and we're pretty active on social media too, those links down there.
This webinar has been recorded and will be published at that YouTube channel there, but we will also include a link to it in the follow-up email that comes out later today or early tomorrow. Thanks for attending.
Thank you very much, Mel, we always appreciate you coming on to share expertise all things tax. And I'm sure the audience appreciates it too.
MEL KNIGHT: Thanks for having me.
MATT CRICHTON: And thanks, everyone, for attending, and a quick thanks to Chris and Sarah, who have been answering all your questions in the background in the live chat.
Again, if we didn't get to your question, we will endeavour to give you an answer by email later, so look out for that in a day or so.
If you have any questions, comments or feedback, specifically about the webinar, send that to firstname.lastname@example.org . And, as I mentioned at the start, if you've got 20 seconds, as we close this, to do the feedback survey, we'd really appreciate it. We get a lot out of that.
Once again, thanks very much, everyone. We hope you enjoy your day, and we hope you got a lot out of this webinar.