Assisting victims of disasters
Assisting victims of disasters
Introduction
This document provides information for individuals and organisations that want to collect funds or make donations to help victims of disasters that occur in Australia or overseas.
The document has six sections:
Collecting gifts on behalf of a DGR
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Your organisation may wish to collect money on behalf of an established deductible gift recipient (DGR). Examples of this type of arrangement include collections conducted by financial institutions, retail outlets and telephone or electricity providers. Employers may also collect money on behalf of DGRs by setting up a workplace giving arrangement or providing salary sacrifice for employees.
This section provides more information on these arrangements.
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Making a donation
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Donations to a disaster relief appeal may be tax deductible if the appeal is conducted by a DGR or by an organisation collecting on behalf of a DGR. A DGR is an organisation that is entitled to receive tax deductible gifts.
This section helps you to check:
- which organisations are DGRs
- the types of organisations that collect money on behalf of DGRs
- how to locate information on disaster appeal funds
- the type of tax deductible donations businesses can make.
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Setting up a new appeal fund
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Your organisation may wish to set up its own appeal fund to help victims of a disaster in Australia or overseas. The types of appeal funds that can receive tax deductible gifts include:
- Australian disasters - necessitous circumstances funds, public benevolent institutions, Australian disaster relief funds and public ancillary funds.
- overseas disasters - overseas aid funds, developed country disaster relief funds and public ancillary funds.
To set up an appeal fund, your organisation will need to firstly consider if it's entitled to our endorsement as a DGR.
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Fundraising events
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One way of providing assistance to victims of disasters is through fundraising activities. Your organisation will need to consider the tax treatment of fundraising activities, including income tax and goods and services tax (GST) requirements.
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State and territory fundraising requirements
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Fundraising activities are regulated by state and territory authorities. Each state and territory has its own laws for these activities.
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Receipts for gifts and contributions
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Donors should keep records of their donations made directly to DGRs or through an organisation collecting on behalf of a DGR.
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Collecting gifts on behalf of a DGR
If your organisation wishes to collect money for disaster relief, it may be more expedient to arrange with an established deductible gift recipient (DGR) for you to collect money on their behalf. The DGR will already have the required infrastructure in place to collect gifts that are tax deductible and issue receipts.
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A deductible gift recipient is an organisation that is entitled to receive income tax deductible gifts and deductible contributions. The organisation is either endorsed by us or specifically listed in the tax laws as a DGR.
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You can check whether an organisation is a DGR on the Australian Business Register at www.abn.business.gov.au by searching on the organisation's name or Australian business number (ABN).
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Organisations may collect gifts on behalf of DGRs through workplace giving and other arrangements.
Employers
Workplace giving programs
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
- the gift is made under a regular planned giving arrangement.
Workplace giving programs allow 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.
DGRs are not required to issue receipts to donors, although an employer may request a receipt from the DGR. The employee should retain a statement from their employer with details of their gift:
- to help in the preparation of their tax return
- in case we check their claims.
One-off workplace giving arrangements
There are no specific requirements that workplace giving must be periodic. If the employer is willing to set up one-off workplace giving, this is an acceptable arrangement.
The employee should retain a statement from their employer with details of their gift:
- to help in the preparation of their tax return
- in case we check their claims.
Salary sacrifice
Employees may also arrange for gifts to be made to DGRs through their employer under salary sacrifice arrangements.
In this situation:
- the employee agrees with their employer that a certain amount of their pre-tax pay will be paid to a DGR
- the employee pays income tax on the reduced salary or wages
- the employer claims the tax deduction for the payment to the DGR, not the employee
- from 1 April 2008, the payment to the DGR is not a fringe benefit.
Differences between workplace giving and salary sacrifice arrangements
Workplace giving
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Salary sacrifice arrangements
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The employer forwards the employee's donations to the DGR. The employee is still making the donation to the DGR.
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The employer pays the employee a reduced salary and also makes a donation to the DGR.
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The employee claims a deduction for their donation to the DGR in their own income tax return.
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The employer claims a deduction for making the donation in their income tax return. The employee is not entitled to claim an income tax deduction because it is the employer who is making the donation to the DGR.
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The amount of the employee's gross salary remains the same.
Generally, the donation amount is a fixed amount that the employer deducts from the employee's pay each pay day.
The employer may choose to reduce the amount of tax deducted from the employee's pay each pay period to account for the donation. (The employee still claims a tax deduction in their return.)
Alternatively, the employer may choose not to reduce the amount of tax withheld from the employee each pay period and the employee will claim a tax deduction for the amount donated at the end of the financial year.
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The employee's gross salary is reduced by the salary sacrificed amount and the employee pays income tax on the reduced salary.
The amount of tax that the employee pays is reduced, but only because they now have a reduced salary.
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Donations made under salary sacrifice arrangements
From 1 April 2008, donations made to a DGR under salary sacrificing arrangements do not result in employers incurring a fringe benefits tax (FBT) liability.
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For more information about:
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Other organisations
An organisation that is authorised by a DGR may collect tax deductible gifts from the public on behalf of the DGR. Examples include collections through:
- financial institutions - via a direct debit to the customer's bank account
- retail outlets - via an item included in the customer's shopping docket
- telephone or electricity providers - via a charge on the customer's statement of account.
DGRs and organisations that are authorised to collect on their behalf will have confirmed:
The DGR may prefer to issue receipts and ask that the collector supply details of the name, address and amount collected from each donor. Alternatively, arrangements may be agreed to whereby the collector will issue a statement to each donor identifying the amount collected on behalf of the DGR - see Receipts for gifts and contributions.
Example
Following an overseas disaster, an organisation wanted to become a collection point for a DGR through its supermarket. This was able to be done in the following way:
- the checkout docket included words that made it clear the amount was for the DGR in relation to the disaster
- the docket included the amount donated
- the customer was advised that they needed to retain their docket for tax purposes
- the supermarket was required to be able to substantiate that the donation was forwarded to the DGR.
It was up to the organisation to ensure that the DGR had an overseas gift fund for the disaster so that the funds donated by their customers could be used for that purpose only.
Making a donation
Only certain types of organisations can collect tax deductible gifts. These organisations must be DGRs.
You can check whether an organisation is a DGR on the Australian Business Register at www.abn.business.gov.au by searching for the organisation's name or Australian business number (ABN).
We do not provide a list of disaster relief funds in the event of a disaster.
The Australian Government Disaster Assist website at www.disasterassist.gov.au provides:
- up-to-date public information messages
- relevant free call numbers
- information on Australian Government assistance packages
- links to other relevant websites and information.
The Australia Emergency Management website at www.em.gov.au includes information on the Natural disaster relief and recovery arrangements (NDRRA). It provides funding to states and territories to help pay for natural disaster relief and recovery costs.
In relation to overseas disasters, charities and other benevolent organisations established under the laws of other countries may seek donations. If these organisations are not DGRs in Australia, there is no tax deduction for donations to them.
Donations to a disaster relief appeal can be made directly to a DGR or through an organisation that is authorised to collect donations on behalf of a DGR - see Collecting gifts on behalf of a DGR.
If you are a business owner considering making a gift of money or property to a DGR, you should be aware of the circumstances where a deduction may be allowed, whether it is a financial payment or in the form of goods. For example, where such gifts are made to an approved DGR, a deduction will be allowed. Where goods or services are provided directly to people affected by a disaster, a tax deduction for the value of the goods or services may still be deductible in full - for example, where they are provided as part of a publicity campaign or as a form of marketing. The deduction would not be allowable as a gift, but as a business deduction.
If you make a donation, you will need to keep a record - see Receipts for gifts and contributions.
Setting up a new appeal fund
If your organisation wants to establish its own tax deductible appeal fund, you will need to firstly consider whether we endorse your organisation (or the fund) as a deductible gift recipient (DGR).
Only organisations that fall within the general categories of DGRs set out in the income tax law and meet the conditions of the category can apply to us to be endorsed (the process of applying for DGR endorsement is explained under the DGR endorsement process). Where a disaster relief fund fails to satisfy the requirements of a general category of DGR, it may approach government to seek specific listing in the Income Tax Assessment Act 1997 as a DGR.
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If your organisation wishes to establish an appeal fund to help victims of disasters:
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Australian disasters
Categories of DGR that may be established to provide for disaster relief include:
- necessitous circumstances funds
- public benevolent institutions
- Australian disaster relief funds
- public ancillary funds.
In response to large-scale disasters, government may also specifically list funds in the income tax legislation to receive tax deductible donations from the public (see Deductible gift recipients listed by name in the tax law).
Necessitous circumstances funds
A necessitous circumstances fund is a public fund established and maintained for the financial relief of people in Australia who are in necessitous circumstances.
The expression 'necessitous circumstances' refers to financial necessity. It does not extend to needs generally. The particular circumstances giving rise to financial necessity might not be permanent. For example, cyclones, floods and other disasters can cause people to be in short-term financial need.
The common method of relieving necessitous circumstances is direct distributions of money or goods to people.
Public benevolent institutions
Where the relief provided goes beyond distributions of money or goods, the organisation is more likely to be a public benevolent institution.
A public benevolent institution is a non-profit organisation established and maintained for the direct relief of poverty, sickness, suffering, distress, misfortune, disability or helplessness.
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For more information on public benevolent institutions, refer to GiftPack (NAT 3132).
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Australian disaster relief funds
An Australian disaster relief fund is a public fund that is established for charitable purposes. The fund must also be established and maintained solely to provide funds for the relief of people in Australia in distress as a result of a disaster. The disaster must be declared and must meet the relevant criteria. Australian disaster relief funds can include funds providing relief by way of assistance to re-establish a community.
To qualify, the disaster must:
- be declared
- have developed rapidly
- have resulted in widespread damage or physical suffering.
One of the following must apply to the disaster:
- it is declared to be a disaster by a Treasury Minister
- it is declared to be a disaster by, or with the approval of, a Minister of a state or territory under the law of the state or territory
- it gives rise to a declaration of a state of emergency by, or with the approval of, a Minister of a state or territory under the law of the state or territory.
Many disasters that are declared in government media releases and websites as disasters do not meet the declaration requirements of this DGR category. We maintain a list of disasters that have met these requirements.
This type of fund may provide money for a broad range of activities. These include providing emergency shelter, health care and food supplies, and relief for people through trauma counselling and through work on buildings, amenities, locations and infrastructure.
Public ancillary funds
Public ancillary funds are public funds established and maintained under a will or instrument of trust solely for one of the following purposes:
- providing money, property or benefits to other DGRs
- establishing DGRs.
A public ancillary fund must not carry on any other activities or make distributions to another public ancillary fund.
A public ancillary fund may provide disaster relief by providing money, property or benefits to DGRs that:
- provide disaster relief such as necessitous circumstances funds, public benevolent institutions or Australian disaster relief funds
- require money to restore their own facilities after damage in a disaster.
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For more information on public benevolent institutions, refer to GiftPack (NAT 3132).
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Other DGRs
Other organisations that are DGRs may also seek donations for assistance in relation to damage to their own facilities. For example, a school that is a DGR for its school building fund may seek donations for the repair of the school's buildings damaged in a disaster.
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For more information, refer to GiftPack (NAT 3132).
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Overseas disasters
For organisations that wish to collect tax deductible gifts for the emergency relief of victims of disasters that occur overseas, the relevant DGR categories are as follows:
- overseas aid funds
- developed country disaster relief funds
- public ancillary funds.
In response to large-scale disasters, government has also specifically listed funds in the income tax legislation to receive tax deductible donations from the public (see Deductible gift recipients listed by name in the tax law).
Overseas aid funds
Overseas aid funds are established to provide relief for people in a country declared by the Minister for Foreign Affairs to be a developing country. These funds may provide money for disaster relief in countries where the aid organisation that owns the fund operates, or where its partner aid agencies operate.
Overseas aid funds must meet the requirements of an approval process that is managed by AusAID.
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For more information on developed country disaster relief funds, see Overseas aid funds (NAT 8233).
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Developed country disaster relief fund
Developed country disaster relief funds are public funds established and maintained by a public benevolent institution solely for providing money for the relief of people in a developed country who are in distress as a result of a disaster recognised by a Treasury Minister as a disaster. Developed country disaster relief funds include funds that provide relief by way of assistance to re-establish a community.
The Minister may recognise a disaster if satisfied that the disaster:
- developed rapidly
- resulted in
- the death, serious injury or other physical suffering of a large number of people, or
- widespread damage to property or the natural environment.
The Minister's recognition of a disaster must be announced publicly and must specify the day (or the first day) the disaster is taken to have occurred or commenced. We maintain a list of disasters that have met these requirements.
This type of fund may provide money for a broad range of activities. This includes:
- emergency shelter
- health care
- food supplies
- trauma counselling
- work on buildings, amenities, locations and infrastructure.
Public ancillary funds
Public ancillary funds are established for the purpose of providing money, property or benefits to DGRs or for the establishment of DGRs. Public ancillary funds must not carry on any other activities or make distributions to other public ancillary funds or to private ancillary funds.
A public ancillary fund may provide assistance in relation to overseas disasters by providing funds to DGRs that are overseas aid funds or developed country disaster relief funds. Prior to distribution, the trustees should review the trust deed to ensure it allows for such distributions.
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For more information on public benevolent institutions, refer to GiftPack (NAT 3132).
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The DGR endorsement process
The table below outlines the process to be endorsed by us as a DGR.
Step
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Description
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1
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Before an organisation can apply for endorsement, it must have an Australian business number (ABN).
If the organisation already has an ABN, you can obtain a DGR endorsement application by:
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2
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The organisation completes the DGR endorsement application form and returns it to:
Australian Taxation Office
PO Box 3373
ALBURY NSW 2640
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3
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We assess the application. If we can't make a decision on the information provided, we will ask the organisation to provide additional information or documents.
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4
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The organisation must provide us with any additional information requested. If they don't provide the information, we may refuse to endorse the organisation.
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5
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We will provide the organisation with:
- a written notice of the decision
- the date of effect of the endorsement.
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Fundraising events
Fundraising events are an effective way of raising money to help victims of disasters. There are income tax and GST issues that need to be considered when undertaking fundraising activities.
Income tax
The tax law allows certain organisations to receive tax deductible gifts. These organisations must be DGRs.
Gifts have the following characteristics:
- there is a transfer of money or property
- the transfer is made voluntarily
- the transfer arises by way of benefaction
- no material benefit or advantage is received by the donor.
If a donor receives a material benefit as a result of making a gift, there will be no deduction available.
Example
John attends a celebrity tennis match arranged by a DGR to raise funds for an overseas disaster. The cost of a corporate box is $300. This includes the admission fee and a component described as a donation ($100). As the donation component is compulsory, it is not deductible.
If John makes a donation of $100 to a DGR at the tennis match, he could claim a tax deduction for the $100 donation. The admission fee would not be tax deductible.
Certain fundraising events conducted by DGRs encourage contributions that extend minor benefits to the contributor. Under long-standing tax law principles, the receipt of a material benefit taints the payment and precludes it from being treated as a gift and the entitlement of a tax deduction.
However, contributions made by individuals to DGR may be tax deductible if they are for:
- the right to participate in an eligible fundraising event (for example, the purchase of a ticket to attend a charity ball)
- the purchase (by successful bidding) of goods or services at fundraising auctions conducted by a DGR.
To be tax deductible, a contribution must:
- be made to a deductible gift recipient
- be in respect of an eligible fundraising event
- be an eligible contribution
- comply with any relevant gift conditions
- be made by an individual.
If an organisation conducts a fundraising event on behalf of a DGR, the organisation must ensure it has authorisation from the DGR prior to arranging the event.
Goods and services tax (GST)
Certain organisations may be entitled to GST concessions in relation to their fundraising activities. Endorsed charitable institutions, endorsed trustees of charitable funds, gift deductible entities or government schools may choose to treat certain fundraising events as input taxed.
If an organisation chooses to treat a fundraising event as an input-taxed fundraising event, it will have to treat all sales it makes in connection with the event as input taxed. That is, the organisation will not be entitled to claim GST credits for any acquisitions in relation to the event and it will not be required to charge GST on the sales it makes.
The following fundraising events may be treated as input taxed:
- a fete, ball, gala show, dinner, performance or similar event
- other events where all goods are sold for $20 or less
- the event cannot involve the sale of alcohol or tobacco
- the selling of the goods must not be a normal part of the supplier's business - an example is where a charity holds an annual flower day where it sells flowers for $2 each and the charity is not in the business of selling flowers
- an event that has been approved by us as a fundraising event.
The sale of alcohol and tobacco at a fete, ball, gala show, dinner, performance or similar event will not prevent the event from being treated as an input-taxed fundraising event.
Supplies relating to the event will be treated according to normal GST principles and accordingly subject to GST where an organisation:
- does not choose to treat a fundraising event as input taxed
- that is not an endorsed charitable institution, an endorsed trustee of a charitable fund, a gift deductible entity or a government school holds a fundraising event (for example, a concert or a sporting event).
Example
XYZ Corporation holds a cricket match to raise funds for an Australian disaster. There are general admission fees of $55 and corporate box charges of $550. XYZ Corporation is registered for GST. However, it is not a charity. The organisation will have a GST liability as it makes taxable supplies of the rights to attend the event for the fees and charges.
If XYZ Corporation was a charity or another organisation hosted the event as an agent for the charity, the charity could apply to us to have the event treated as a fundraising event. The charity could then input tax all the supplies that it makes in connection with the event so that it has no GST liability.
If any of the following makes certain supplies relating to an event they may be treated according to normal GST principles and accordingly subject to GST:
- an endorsed charitable institution
- an endorsed trustee of a charitable fund
- a gift-deductible entity
- a government school.
For these organisations, the supply of any of the following is GST-free provided it does not contravene a state or territory law:
- a ticket in a raffle
- an acceptance of a person's participation in a game of bingo
- a gambling supply of a kind specified in the GST laws.
State and territory fundraising requirements
Fundraising activities such as bingo, raffles and door knock appeals are regulated by state and territory authorities and each state and territory has its own laws for these activities.
Some states focus on regulating the fundraising activities undertaken by charitable organisations while others regulate fundraising for more general purposes. In addition, some states have different departments or agencies that look after specific fundraising activities.
We have been working with different state and territory agencies to:
- inform organisations about these requirements
- develop administrative arrangements that will facilitate gifting and minimise the cost of collecting donations.
Any enquiries about state and territory regulations should be directed to the relevant authority in the area.
Receipts for gifts and contributions
Gifts
Donors should keep records of all their deductible gifts, including:
- the date the gift was made
- the name of the DGR to which the gift was made
- the amount of the gift
- a description of the gift, if it was property
- any election to spread the deduction.
Donors should ask for receipts from authorised collectors when making gifts to DGRs and keep the receipts with their other tax records. This will help donors prepare their tax returns and substantiate their claims if we check them.
DGRs are not required by the income tax law to issue receipts for deductible gifts, but any receipts they issue must specify:
- that the receipt is for a gift
- the name of the DGR
- the ABN of the DGR.
Where the disaster relief fund cannot supply receipts to its authorised third-party collector, we will accept third-party receipts as evidence of a gift for the donor to claim a deduction where the receipt:
- identifies the DGR
- states the fact that the amount is a donation to the DGR.
There is no requirement in the tax law for the DGR's ABN to be included on a third-party receipt.
For example:
If a donor has made a gift to a DGR …
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the donor should retain …
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through their employer
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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, the donor should obtain a statement that all of the gifts were made to DGRs
- the total amount of gifts made to the DGRs.
This statement can be given to the donor on:
- their pay as you go (PAYG) payment summary
- other written or electronic communication from the employer.
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at a bank, credit union or other financial institution
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statements such as:
- a bank statement showing the amount paid to the DGR
- a stamped deposit slip showing the amount paid and the name or account number of the DGR.
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using internet banking
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a printed copy of their transfer details after making the gift.
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by credit card or direct debit to their bank, credit union or other financial institution account
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their account records.
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at a retail outlet
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the shopping docket that contains the details of the gift.
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through another organisation -such as a telephone or electricity provider
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their account records, with proof of payment.
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Contributions
Contributors will need to keep records of their deductible contributions. DGRs are not required by the income tax law to issue receipts for deductible contributions, but any receipts they issue must specify:
- the name and ABN of the DGR
- the fact that the contribution is made in return for a right to attend a specified fundraising event, or for the purchase of goods and services at a fundraising auction
- the amount of the contribution - if the contribution is money
- the value of the minor benefit (in respect of attendance at a fundraising event and/or the purchase of goods and services at a fundraising auction) provided by the DGR in return for the contribution. The minor benefit must include GST and should be recorded on the receipt as the 'GST-inclusive market value'.
Last Modified: Thursday, 17 May 2012
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