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  • Approved research institute

    An approved research institute (ARI) is either:

    • the Commonwealth Scientific and Industrial Research Organisation (CSIRO)
    • any university, college, institute, association or organisation that has been approved
      • in writing by the one of the approving authorities
      • as an institution, association or organisation for undertaking scientific research which is, or may prove to be, of value to Australia.
       

    An ARI may take many forms, including a limited liability company.

    An ARI may be:

    • a charity, such as a public university or college
    • an entity that is not a charity, such as a government authority
    • an institution, association or organisation that is part of an entity, such as a section of a government department or a research institute that is operated by a public university.

    An organisation approved as an ARI is eligible for endorsement as a DGR.

    Approving authority

    The approving authorities are:

    • CSIRO
    • National Health and Medical Research Council (NHMRC)
    • Department of Education and Training's Research and Higher Education Infrastructure Branch.

    DGR endorsement

    DGR endorsement is the approval process for organisations that want to receive tax-deductible gifts.

    DGR endorsement can happen in two ways:

    • An organisation, such as a charity or a government authority, may be an ARI in its own right. Therefore the organisation as an ARI is eligible to be endorsed as a DGR in its own right.
    • A part of an organisation, such as a section of a government department, may be an ARI. Therefore the organisation that operates the part that is an ARI is eligible to be endorsed as a DGR for the operation of that part.

    You must apply to us for endorsement of your organisation as a DGR.

    Organisations listed by name as a DGR in the income tax law do not need to apply for endorsement.

    DGR endorsement is separate from income tax exemption. Endorsement as a DGR does not entitle your organisation to be exempt from paying income tax.

    Only certain types of not-for-profit organisations are exempt from income tax. If your not-for-profit organisation does not fall within one of the types of exempt entities, you cannot be exempt.

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    Requirements for ARI approval and DGR endorsement

    For a body (that is, a university, college, institute, association or organisation) to gain approval as an ARI it must:

    • be a not-for-profit institution, association or organisation in Australia
    • be undertaking scientific research which is, or may prove to be, of value to Australia
    • have a suitably qualified research committee that evaluates the merits of proposed research programs and determines how any research funds held are applied to research purposes
    • have an administrative structure capable of, and responsible for, the management of gifts to ensure that they are used only for scientific research
    • have all tax-deductible gifts for this purpose accounted for separately and used exclusively for scientific research
    • have an appropriate dissolution clause that ensures in the event of winding up or upon revocation of endorsement as a DGR, any surplus remaining is to be transferred to an institute with similar objects and entitled to receive tax-deductible gifts.

    To be endorsed as a DGR in its own right, the body must also:

    • have an Australian Business Number (ABN)
    • be registered with the Australian Charities and Not-for-profits Commission (ACNC) if it is a charity.

    If the body is part of an organisation, the organisation must also meet the following requirements to be endorsed as a DGR for the operation of the body:

    • it has an ABN
    • it meets the gift fund requirements, if required.

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    Not-for-profit

    To be not-for-profit, an organisation must not be carried on for the profit or gain of its individual members. We recognise an organisation as not-for-profit if its constitution or governing documents prohibit distribution of profits or gains to individual members during its operations and when winding up, and its actions are consistent with the prohibition.

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    Undertaking scientific research

    An ARI is any institute which is approved in writing for undertaking scientific research which is, or may prove to be, of value to Australia.

    Scientific research means any activity in the fields of natural or applied science for the extension of knowledge.

    Definitions (for the purposes of an ARI application) include:

    • Natural science is the study of material phenomena of animate and inanimate things, including subjects such as physics, chemistry, biology, astronomy. 
    • Applied science is the application of some branch of science for the solution of practical problems (it is not confined to the natural sciences). 
    • Extension of knowledge is an extension of or addition to the sum total of knowledge, not an extension of the field over which knowledge already known is spread. The definition does not include activities relating to the dissemination of existing knowledge such as the provision of scholarships for students, the organisation of conferences, congresses and symposia and the publication of information (other than the results of the ARI's own research work, undertaken through this program).

    Research committee

    To gain ARI status it is necessary to have a research committee of at least five people, the majority of whom are appropriately qualified in the field of research that is to be undertaken or have appropriate experience in reviewing research.

    The research committee must take sole responsibility for ensuring that the research undertaken is scientific in nature and that it is, or may prove to be, of value to Australia.

    The research committee must have effective control over the disbursement of funds within the institute's research fund account. Relevant monies are donations to the institute in respect of which the donor would be entitled to an income tax deduction.

    Membership of the committee is subject to the prior approval of the approving authority. Individuals should:

    • be nominated on the basis of their proven ability to direct a research program, as evidenced by their academic qualifications and professional appointments
    • have consent from all other research committee members
    • give their consent to join the research committee.

    All subsequent changes in the membership of a committee require the prior approval of the approving authority.

    The institute's documentation should make clear that it is the research committee that has the power to determine the research activities which are to be funded from the research fund.

    Conducting research and sub-contracting

    To gain ARI approval, institutes should conduct their own research. However, they will be able to sub-contract out a portion of their research to appropriately qualified researchers or research bodies. In such circumstances, all of the following conditions must be met:

    • The institute retains control over the research being conducted by the contractor.
    • The institute retains effective ownership of the results of the research.
    • The institute identifies the research work that will be contracted out and satisfies the approving authority of the need to outsource that work in order to meet research objectives.

    Retains control

    When research activities are carried out by or on behalf of an institute, it is expected that the institute (via the research committee) will have and exercise proper control over the conduct of those activities.

    Essential elements of control of the conduct of research activities are the capacity to decide on major changes of direction in those activities, the ability to stop an unproductive line of research, the scope to follow up or otherwise on an unexpected result and, ultimately, the power to end a project.

    Retains effective ownership

    The institute must have effective ownership of the results of research activities. Where activities are carried out by or on behalf of an institute, they generally get results which they can effectively own.

    Some theoretical rights of ownership may be given to others without denying this effective ownership of the institute. For instance, an institute that has contracted out research activities may permit the researcher certain rights of scientific publication. The institute would nevertheless be the effective owner of the results and would be required to make them available to all interested parties on equal terms.

    The approving authority will seek additional information from the applicant if required to make a full assessment of eligibility for ARI approval.

    Publication of results of research

    An ARI must openly publish the results of their research, in the scientific and technical press. Any Australian patents issued in the course of such research should be made available to all interested parties, on equal terms.

    Gifts: research fund account

    An ARI must ensure all gifts received be used exclusively for the purpose of approved scientific research in the fields of natural or applied science. The institute would need to account for the use of these gifts.

    The approving authorities require a separate research fund account to be kept and all gifts, deductible contributions and money related to them be paid into this account. The research fund account would be subject to independent annual audit.

    Gift fund

    An organisation endorsed as a DGR for the operation of an ARI must maintain a gift fund for tax purposes. In this case, the research fund account could be the gift fund but it would need to meet the requirements of a gift fund.

    An ARI endorsed as a DGR in its own right is not required to maintain a gift fund for tax purposes but it may choose to do so.

    An organisation already endorsed as a DGR in its own right as well as endorsed for the operation of its ARI is also not required to maintain a gift fund but it may choose to do so.

    Example 1: Gift research fund

    A public university is endorsed as a DGR in its own right. It is also endorsed as a DGR for the operation of its research institute. The institute conducts approved scientific research into neurological diseases. The university chooses to maintain a gift fund for the institute. Any gifts received for this research is banked into the institute's research fund account and used only for the purpose of the research.

    Example 2: No gift fund

    An institute conducts approved scientific research and is endorsed as a DGR in its own right. It is not required to maintain a gift fund but instead accounts for all gifts received and used for its approved research in its records. This is in addition to keeping a research fund account required by the institute's approving authority.

    End of example

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    Dissolution clause

    The ARI's constituent documents must provide that, in the event of the organisation being wound up or upon revocation of endorsement as a DGR (for example, because it had ceased to carry out approved research activities) whichever occurs first, any surplus remaining is to be transferred to an institute with similar objects and entitled to receive tax-deductible gifts.

    Examples of dissolved ARIs

    The following examples show use of the dissolution clause for ARIs that are endorsed as a DGR in their own right or endorsed to operate an ARI.

    ARI endorsed as a DGR in its own right

    Example 1: Sample clause 1 – DGR ARIs registered with the ACNC

    If the institute is wound up or its endorsement as a deductible gift recipient is revoked (whichever occurs first), any surplus of the following assets shall be transferred to another institute with similar objects, which is charitable at law, to which income tax deductible gifts can be made:

    • gifts of money or property for the principal purpose of the institute
    • contributions made in relation to an eligible fundraising event held for the principal purpose of the institute
    • money received by the institute because of such gifts and contributions.

    Example 2: Sample clause 2 – DGR ARIs not registered with the ACNC

    If the institute is wound up or its endorsement as a deductible gift recipient is revoked (whichever occurs first), any surplus of the following assets shall be transferred to another institute with similar objects to which income tax deductible gifts can be made:

    • gifts of money or property for the principal purpose of the institute
    • contributions made in relation to an eligible fundraising event held for the principal purpose of the institute
    • money received by the institute because of such gifts and contributions.
    End of example
    Organisation endorsed as a DGR for the operation of an ARI

    Example 1: Sample clause 3 – DGR endorsed for operation of ARI

    If the institute is wound up or if the endorsement (if any) of the organisation as a deductible gift recipient for the operation of the institute is revoked (whichever occurs first), any surplus assets of the research fund (gift fund) that remain after the payment of liabilities attributable to it shall be transferred to another institute with similar objects to which income tax-deductible gifts can be made.

    End of example

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      Last modified: 29 Jul 2016QC 22796