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Australia To Reform Taxation Of Charitable Donations

by Mary Swire,, Hong Kong

15 June 2017

The Australian Government is consulting on proposals to amend the deductible gift recipient (DGR) regime, which entitles donors to claim tax deductions on their donations.

There are around 28,000 DGR organizations in Australia. The tax concessions attached to DGR status are worth more than AUD1.3bn (USD988.3m) a year.

According to the Government's discussion paper, there are concerns that the application process for obtaining DGR status is too complex. DGR concessions were first introduced in 1915, and there are now 51 general categories, along with different processes for organizations that are already registered as charities and those that are not.

In addition, certain types of DGRs are required to establish a public fund to receive tax deductible gifts and contributions. This requires the nomination of a "responsible person." The Government said there is some confusion between the definitions of "responsible person" set out by the Australian Taxation Office (ATO) and the Australian Charities and Not-for-profits Commission (ACNC). It also believes that DGR organizations in regional and rural parts of Australia often face difficulties in nominating a responsible person.

The Government added that there are concerns that some charities and DGRs undertake advocacy activity that may be out of step with the expectations of the broader community, and that requirements for DGR eligibility may be overlapping and inconsistently applied across organizations.

The discussion document outlines the following possible options for reform:

  • All DGRs could be required to be charities registered and regulated by the ACNC;
  • The ACNC could revoke an organization's registration status, enabling the ATO to revoke the organization's DGR status, if one of the grounds for revocation under the ACNC Act were to exist;
  • To simplify the application process for DGRs, the administration of the four DGR registers could be transferred to the ATO. Organizations that do not fall within the four registers could still apply to the Minister for Revenue and Financial Services for specific listing;
  • The public fund requirement for DGRs that are charities could be removed; and
  • Regular reviews could be undertaken by the ACNC and/or the ATO to ensure that an organization's DGR status is up to date.

The closing date for submissions is July 14.

TAGS: tax | tax incentives | Australia | tax breaks | charities

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