DGR reform open for consultation

A proposed reform of the Deductible Gift Recipient (DGR) Register has just been announced. The 2023 reform is currently open for public consultation and closes in 11 days. Here is an explanation of what the proposed changes are, why we may or may not need them, and what they will mean for charities and for-purpose organisations.

What changes are being proposed?

Currently, the Australian Taxation Office (ATO) manages most, but not all, of the DGR categories that allow organisations to receive tax deductible donations from the public. Four categories are administered by other government agencies. Organisations falling into these categories must seek pre-approval from these agencies as part of their eligibility criteria.

The four categories are:

• Environmental organisations, administered by the Department of Climate Change, Energy, the Environment and Water. 

• Harm prevention charities, administered by the Department of Social Services. 

• Cultural organisations, administered by the Department of Infrastructure, Transport, Regional Development, Communications and the Arts. 

• Overseas aid organisations, administered by the Department of Foreign Affairs and Trade.

The reform would see the ATO manage and endorse all 52 categories, de-politicising and streamlining the system for providing DGR status.

Why do we need a DGR reform?

Assistant charities minister, Andrew Leigh, told Pro Bono News the proposed change is trying to prevent the Government from withholding DGR status from particular charities with alternative agendas to their own.

“...the aim is to simplify the process for charities getting tax deductibility status, and to remove the possibility that a worthy charity misses out on tax deductibility status simply because a conservative government doesn’t like them,” Leigh said.

“Charities should get tax deductibility status based on the quality of their work, and whether they match the requirements of the category.”

The minister used the opportunity to compare the Liberal and Labor government approaches to awarding DGR status, naming the 9-year Liberal Government leadership “a nine year long Liberal war on charities”.

“...part of that was preventing worthy charities getting tax deductibility status because Liberal ministers just didn’t like them.”

“Australia’s charities are too busy to be fighting ideological games with governments that don’t respect them,” he added.

What does the reform mean for charities?

The current proposed DGR Register reforms present several benefits for charities looking to obtain DGR status. The benefits include:

1. Consistency across the system and reduced “red tape”

2. A simplified application process and minimised reporting requirements 

3. Access to DGR status for more organisations

4. Significantly reduced approval time – from up to two years down to around one month.

What the reform does not address is limitations to the categories themselves. An organisation must still meet the unchanged eligibility criteria of a DGR category, and not all charities are eligible for DGR endorsement. It is argued keeping categories as they are stops some for-purpose organisations from accessing “a critically reliable funding source”. 

“If we were writing the DGR categories afresh today, they certainly wouldn’t look exactly the way they do now,” concedes Leigh.

The 2021 reform also established that all entities holding deductible gift recipient (DGR) endorsement in 11 categories must be registered as charities with the ACNC.

The 2023 reform so far maintains a narrow focus on de-politicising DGR endorsement and management to ensure accessibility opens up to more organisations. ?With public consultation now open, charities and for-purpose organisations will have their eye on further proposed changes. Consultation on the Deductible Gift Recipient (DGR) Registers Reform is open until 19 February 2023. Follow the link to join the discussion.