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Fundraising - Tax basics for non-profit organisations |
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Note: This document forms part of our publication Tax basics for non-profit organisations. To view the full publication, click here. The information in this document has been updated for changes that have occurred since the publication was released in June 2007. |
Deductible gift recipients
Certain organisations are entitled to receive income tax deductible gifts and tax deductible contributions. They are called deductible gift recipients (DGRs).
What is a deductible gift recipient?
The income tax law determines which organisations and types of organisations can qualify as DGRs. DGRs are:
- endorsed by the Tax Office, or
- listed by name.
All DGRs (except those listed by name) must be endorsed by the Tax Office. If they are not endorsed, donors cannot claim income tax deductions for their gifts.
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You can check if an organisation is a DGR by:
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DGRs listed by name
DGRs listed by name include prescribed private funds and organisations such as the Australian Sports Foundation and Amnesty International Australia. There are two ways organisations can become DGRs listed by name. For prescribed private funds, the government gazettes them into the income tax regulations. For others, Parliament amends the income tax law to list the organisation by name in the income tax law.
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For more information refer to the ‘DGRs listed by name’ chapter in our guide GiftPack for deductible gift recipients & donors (NAT 3132). To obtain this publication, see More information. |
Endorsed DGRs
For other organisations to be DGRs, they must fall within a general DGR category set out in the income tax law. Examples of the general categories include:
- health promotion charities
- school building funds
- public benevolent institutions
- overseas aid funds
- registered cultural and environmental organisations, and
- public libraries, museums and art galleries.
What are the types of DGR endorsement?
There are two types of endorsement:
- where an organisation as a whole is endorsed as a DGR, and
- where an organisation is endorsed as a DGR for the operation of a fund, authority or institution that it owns or includes.
If an organisation is endorsed as a whole, gifts to the entire organisation may be tax deductible. If an organisation is endorsed for the operation of a fund, authority or institution, only gifts to this part of the organisation may be tax deductible.
Is your organisation entitled to DGR endorsement?
To be entitled to DGR endorsement, your organisation must:
- fall within a general DGR category as set out in the tax law
- have an Australian business number
- have an appropriate dissolution/revocation of endorsement clause(s)
- maintain a gift fund (if seeking endorsement for the operation of a fund, authority or institution), and
- be in Australia (with some exceptions).
Organisations that meet the requirements for endorsement can apply to the Tax Office using an Application for endorsement as a deductible gift recipient (NAT 2948).
Maintaining DGR status
To maintain their endorsed status, most DGRs will need to:
- include specific information on receipts
- self-review their entitlement to DGR endorsement, and
- continue to be in Australia (with some exceptions).
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For more information refer to the ‘Endorsed DGRs’ chapter in our guide GiftPack for deductible gift recipients & donors (NAT 3132). To obtain this publication, see More information. |
Tax deductible gifts
For a donor to claim a tax deduction for a gift, the payment must:
- be truly a gift
- be made to a DGR
- be a gift of money or a certain type of property, and
- comply with any relevant gift conditions.
What is a gift?
Not all payments to DGRs are tax deductible. 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, and
- no material benefit is received by the donor.
Examples of payments that are not gifts include:
- purchases of raffle or art union tickets
- purchases of items such as chocolates and pens
- the cost of attending fundraising dinners, even if the cost exceeds the value of the dinner
- membership fees
- payments to school building funds as an alternative to an increase in school fees, and
- payments where the person has an understanding with the recipient that the payments will be used to provide a benefit for the ‘donor’.
Gift conditions
For some DGRs, the income tax law adds extra conditions affecting the kinds of deductible gifts they can receive.
The gift may only be tax deductible:
- between certain dates, or
- for a specific use.
Donors should ask DGRs if conditions apply.
How much can be claimed?
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 property, there are various valuation rules.
The deduction for a gift cannot add to or create a tax loss.
In certain circumstances, donors can elect to spread a gift deduction over a period of up to five years.
What records do donors need?
Donors should keep records of their deductible gifts, including:
- the date the gift was made
- the name of the DGR to which the gift was donated
- the amount of the gift
- any elections to spread the deduction, and
- a description of the gift if it was property.
When property has been gifted, additional details may need to be recorded. This will help when preparing tax returns and in case claims are checked by the Tax Office.
DGRs are not required by the income tax law to issue receipts for deductible gifts, but any receipts issued must specify:
- that the receipt is for a gift
- the name of the DGR, and
- the ABN of the DGR.
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For more information refer to the ‘Donors and gifts’ chapter in our guide GiftPack for deductible gift recipients & donors (NAT 3132). To obtain this publication, see More information. |
Tax deductible contributions
Certain DGR fundraising events encourage contributions which may at the same time extend minor benefits to the contributor.
Contributions made by individuals to DGRs in relation to DGR fundraising events such as fetes, balls, gala shows, dinners and charity auctions may be tax deductible.
To be deductible, a contribution must meet several requirements:
- the contribution must be made to a DGR for:
- a right to attend or participate in a fundraising event in Australia, or
- the purchase of goods or services as a successful bidder at an auction that is, or is at, a fundraising event in Australia
- the contribution must be more than $150 (and can include property contributions made for a right)
- the GST inclusive value of the right or the goods or services (the benefit) must not exceed the lesser of $150 and 20 per cent of the value of the contribution
- the contribution must satisfy any gift conditions relating to the DGR as though it was a gift, and
- the contribution must be made by an individual.
The deduction is limited to that part of the contribution that is in excess of the benefit received in return for making the contribution.
Testamentary contributions, that is, contributions made under a will, are not tax deductible.
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For more information refer to Non-profit organisations and fundraising (NAT 13095). To obtain this publication, see More information. |
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, and
- the gift is made under a regular planned giving arrangement.
If a portion of an employee’s pay is donated to a DGR through regular payroll deductions, the employer may reduce the 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.
While 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.
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For more information on workplace giving, refer to How to set up a workplace giving program (NAT 9185). To obtain this publication, see More information. |
GST
If your non-profit organisation is registered (or required to be registered) for GST, the money raised from fundraising activities will be subject to GST unless the funds are a genuine gift to your organisation. If you are a charity, gift deductible entity or government school, the money raised from fundraising events will not be subject to GST if your organisation:
- raises the funds by selling donated second hand goods
- raises the funds by holding a raffle or bingo, or
- is able to treat any sales connected with the fundraising event as input taxed. In this case, the funds raised will not be subject to GST, but your organisation will not be able to claim credits for the GST in any purchases connected with the event.
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For more information on GST concessions available to non-profit organisations, see Goods and services tax. |
State/territory and local government regulations
Fundraising activities such as bingo, raffles and doorknock appeals are regulated by state and territory authorities. As each state has its own laws for these activities, you should direct any enquiries about state and territory regulations to the relevant authority in your area.
The use of public places such as parks, streets and sporting grounds are regulated by local government. If your organisation’s fundraising activities involve the use of a public place, you should check with your local council regarding its requirements.
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For more information refer to Non-profit organisations and fundraising (NAT 13095) To obtain this publication, see More information. |
Last Modified: Wednesday, 12 September 2007
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