Deductible gift recipient - outline for government
Deductible gift recipient - outline for government
This document outlines the types of deductible gift recipients (DGRs), endorsement requirements for DGRs, workplace giving programs, the types of gifts that are tax deductible and what donors have to do to claim deductions for their gifts.
A deductible gift recipient (DGR) is an organisation that is entitled to receive income tax deductible gifts.
The majority of DGRs are endorsed by the ATO. The only DGRs that do not need to be endorsed are those listed by name in the income tax law, including prescribed private funds.
DGR endorsement applies to all general DGR categories. If an organisation falls within a general DGR category and is not endorsed by the ATO, donors cannot claim tax deductions for their gifts to the organisation.
Organisations listed by name in the tax law as DGRs do not need to be endorsed.
There are more than 40 general DGR categories. Examples of the categories include:
- government special schools
- public hospitals
- public authorities for research
- public ambulance services
- public universities
- public libraries, museums and art galleries
- necessitous circumstances funds
- school building funds, and
- the Commonwealth or a state (in relation to gifts for purposes of defence).
For more information on the general categories, refer to GiftPack (NAT 3132).
To be endorsed as a DGR, an organisation must:
- fall within a general DGR category as specified in the tax law
- have an Australian business number
- satisfy the gift fund requirements (if applying for a fund, authority or institution that it operates), and
- be in Australia (with some exceptions).
There are two types of DGR endorsement:
- where an organisation as a whole falls within a DGR category, and
- where a fund, authority or institution that is operated by an organisation falls within a DGR category. Only gifts to this part of the organisation will be tax deductible.
Organisations that meet the requirements for endorsement can apply to the ATO using an Application for endorsement as a deductible gift recipient (NAT 2948). Instructions are also available.
DGRs need to carry out regular self-reviews of their DGR status as they must tell the ATO if they cease to be entitled to endorsement. The law does not require any particular intervals between self-reviews, but the ATO recommends a yearly review. There should also be a review when there is a major change in the organisation's structure or operations.
Things that can affect entitlement include:
- changes to purposes and operations
- failing to maintain a gift fund (if endorsed for a fund, authority or institution)
- where applicable, not satisfying the 'in Australia' requirement, and
- incorrectly issuing receipts for tax deductible gifts or contributions.
To help DGRs when undertaking a self-review, two worksheets are available:
For more information on maintaining DGR status, refer to GiftPack (NAT 3132).
DGRs listed by name in the tax law include organisations such as State Emergency Service South Australia and Playgroup Queensland Incorporated. They also include prescribed private funds.
Most, but not all, gifts to DGRs are tax deductible. To be tax deductible, a gift must be money or property covered by one of the following gift types:
- $2 or more: money
- property > $5,000: property valued by the ATO at more than $5,000
- property < 12 months: property purchased during the 12 months before the gift was made
- shares ≤ $5,000: listed shares valued at $5,000 or less, and acquired at least 12 months before the gift was made
- trading stock: trading stock disposed of outside the ordinary course of business
- cultural gifts: property gifted under the Cultural Gifts Program
- cultural bequests: property gifted under the Cultural Bequests Program
- heritage gifts: places included in the National Heritage List, the Commonwealth Heritage List or the Register of the National Estate.
Workplace giving programs are arrangements where:
- part of an employee's pay is paid, or is to be paid, as a gift to a DGR
- the gift is paid by the employer at the direction of the employee, and
- the gift is made under a regular planned giving arrangement.
A workplace giving program allows a DGR to receive donations as a lump sum from each employer. This reduces the DGR's costs as it has to process only one donation from each employer.
If a portion of an employee's pay is donated to a DGR through regular payroll deductions, the employer may reduce the pay as you go (PAYG) amount it withholds from that employee's pay. For employees, this means they may get the benefit of the reduced tax immediately in their pay.
Whilst the PAYG withholding amount can be reduced because of a gift made through a workplace giving program, the total pay on the employee's payment summary is not reduced by the amount of the gift. This means the employee must claim a deduction for the gift in their annual tax return so that the correct tax can be calculated.
DGRs are not required to issue receipts to donors, although an employer may request a receipt from the DGR.
All the employee needs for their tax records is a statement from their employer identifying:
- each DGR to which a gift was made. If space or printing constraints are such that each DGR cannot be identified in the statement to the donor, a statement that all of the gifts were made to DGRs is acceptable, and
- the total amount of gifts made to the DGRs.
The statement can be given to the employee on:
- their PAYG payment summary, or
- other written or electronic communication for the employer.
Deductions for gifts are claimed by the person or organisation that makes the gift (the donor). A donor can be an individual, company, trust or other type of taxpayer.
To be tax deductible a gift must:
- be made to a DGR
- really be a gift
- be a gift of money or a certain type of property, and
- comply with any relevant gift conditions.
Gifts to charities
Charities can receive tax deductible gifts provided the organisation is a DGR. Some charities are not DGRs and, therefore, cannot receive tax deductible gifts.
The amount of the deduction depends on the type of gift. For gifts of money, it is the amount of the gift. For gifts of shares < $5,000, there are different valuation rules. For gifts of property, there are various valuation rules.
A deduction for a gift cannot add to, or create, a tax loss for the donor. However, donors can elect to spread deductions for certain gifts over a period of up to five years.
Donors need to keep records of their deductible gifts. When property has been gifted, additional details may need to be recorded. This will help donors when they prepare tax returns and in case claims are checked by the ATO.
To obtain copies of our publications:
- visit our website at www.ato.gov.au/nonprofit
- phone 1300 720 092 and quote the NAT number (which is a unique national identifying number we give each of our publications), or
- write to us at GPO Box 9935 in your capital city.
To speak to staff trained to deal with non profit enquiries phone our information line on 1300 130 248.
If you do not speak English and need help from the ATO, please phone the Translating and Interpreting Service on 13 14 50.
If you have a hearing or speech impairment and have access to appropriate TTY or modem equipment, phone 13 36 77. If you have a speech impairment and do not have access to TTY or modem equipment, please phone the speech to speech relay service on 1300 555 727.
Last Modified: Monday, 17 September 2012