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Developing country relief fund or organisation

Gifts to a developing country relief fund or organisation may be tax deductible if endorsed as a DGR.

Last updated 1 January 2024

Overview

Developing country relief funds or organisations deliver development or humanitarian assistance activities (or both) in a developing country and in partnership with entities in the country, based on principles of cooperation, mutual respect and shared accountability.

Changes to the Overseas Aid Gift Deduction Scheme

Prior to 1 January 2024, an overseas aid organisation had to be admitted as an approved organisation under the Overseas Aid Gift Deduction Scheme (OAGDS) administered by the Department of Foreign Affairs and Trade (DFAT) and establish an overseas aid fund in order to have their public fund endorsed as a Deductible Gift Recipient (DGR).

From 1 January 2024, we administer the DGR category for item number 9.1.1 and assess eligibility for a developing country relief organisation, or an organisation operating a developing country relief fund, to be endorsed as a DGR.

If you were endorsed as an overseas aid fund prior to 1 January 2024, transitional provisions apply.

Eligibility criteria

To be eligible for DGR endorsement as a developing country relief fund or organisation the entity must:

Characteristics

To be eligible for DGR endorsement as a developing country relief fund or organisation the entity must have the characteristics of a developing country relief fund or organisation.

Principal purpose

A developing country relief fund or organisation’s principal purpose is the main or dominant purpose for which the fund or organisation exists. A developing country relief fund or organisation can have other purposes which are incidental, ancillary, or secondary to its principal purpose.

A developing country relief fund or organisation’s principal purpose must be delivering development or humanitarian assistance activities (or both):

  • in a country covered by section 30–85 of the Income Tax Assessment Act 1997 (see developing countries)
  • in partnership with entities in the country, based on principles of cooperation, mutual respect and shared accountability.

We take a holistic approach in determining the substance and reality of the fund or organisation's purpose. The objects in the organisation's governing document, or the fund's governing rules, and the activities by which those objects are achieved, are the main factors considered when determining the purpose of the organisation or fund. Other relevant factors can include:

  • other elements in the constituent documents such as its powers, rules, not for profit and winding up clauses, and clauses governing who can benefit from the institution's activities and in what ways
  • how the institution or fund is operated
  • any legislation governing its operation
  • the circumstances in which it was formed
  • its history
  • its control.

Developing countries

For the purposes of this DGR category, a country is considered a developing country if:

Development activities

Development activities improve the long-term well-being of individuals and communities in developing countries and deliver sustained or lasting benefits such as through capacity-building with an appropriate exit strategy. The activities are targeted at a particular group, community or location.

Humanitarian assistance activities

Humanitarian assistance activities save lives, alleviate suffering and maintain human dignity. The activities meet an immediate need such as providing food, shelter, protection, psycho-social support and medical attention but may also encompass other needs such as education, depending on the context

Humanitarian activities are delivered in accordance with the humanitarian principles of:

  • humanity
  • impartiality
  • independence
  • neutrality.

Ineligible activities

Some activities may not be considered development or humanitarian assistance activities because they discriminate or do harm.

The following activities will generally not be considered as part of a fund's or organisation's purpose to deliver development or humanitarian assistance activities:

  • supporting a political party, candidate or organisation affiliated to a political party
  • supporting or promoting a particular religious adherence.

Activities delivered in partnership with in-country entities

In-country Partners

Developing country relief funds or organisations need to demonstrate that they work with in-country partner entities, not just individuals. The developing country relief fund or organisation, and the in-country partner will both contribute and add value to the delivery of aid activities, with shared values and objectives.

Co-operation and mutual respect

Developing country relief funds or organisations need to demonstrate that they cooperate with in-country partners to plan, implement and track progress of activities. Evidence of this would be a discussion, exchange of views or other communication that has been documented between the fund or organisation and the in-country partners and demonstrates cooperation and respect.

Shared accountability

Shared accountability is shown by documented agreements between developing country relief funds or organisations and in-country partners. It is expected that the agreements will include the objectives of the partnership, the roles of each party, the reporting requirements, and financial management arrangements.

Developing country relief funds or organisations need to demonstrate how they ensure that their in-country partners use the funds for the purpose of delivering development or humanitarian assistance activities.

Developing country relief organisation

A developing country relief organisation must be an institution registered with the ACNC as a charity or an Australian government agency.

Institution

A developing country relief organisation that is registered with the ACNC as a charity must also be an institution.

An institution is an organisation established to promote a defined purpose, especially one of public or general utility. An institution carries out activities that translates its purpose into a living and active principle, and can take the legal form of a trust, company or incorporated or unincorporated association. An institution is identified by its activities, size, permanence and recognition.

An institution is not:

  • a fund – for example, a trust merely to manage or hold trust property to make distributions to other entities or people
  • a structure with a small and exclusive membership that is controlled and operated by family members and friends and carries out limited activities.

Gift fund

Developing country relief organisations must maintain a gift fund, and gifts must be received by the organisation’s gift fund. A developing country relief organisation must use its gift fund for its principal purpose only.

The following gift fund requirements must be met:

  • it is a fund
  • it has a name
  • it is maintained and used only for the principal purpose of the organisation
  • all gifts and deductible contributions of money or property for that purpose are made to it
  • any money received by the organisation, because of such gifts or deductible contributions is credited to it
  • it does not receive any other money or property.

Most organisations must be required by a law, its constituent documents or governing rules – to transfer any surplus assets of the gift fund to another gift deductible fund, authority or institution when the organisation is wound up or the DGR endorsement is revoked, whichever occurs first (DGR winding up and revocation requirement). This requirement can be met by including a DGR winding up and revocation clause in the rules of the gift fund.

Sample DGR winding up and revocation clause

If the organisation is wound up or if the endorsement (if any) of the organisation as a deductible gift recipient is revoked, any surplus assets of the gift fund remaining after the payment of liabilities attributable to it, shall be transferred to a fund, authority or institution to which income tax-deductible gifts can be made.

End of example

If the organisation is a registered charity, the clause must state that the surplus assets of the gift fund shall be transferred to a charity with a similar charitable purpose to which income tax-deductible gifts can be made to.

Organisations do not need to meet the DGR winding up and revocation requirement if they are established by an Act of the Commonwealth Parliament, and that Act, or another Act, does not provide for the winding up or termination of the entity. A gift fund is still required.

Developing country relief fund

A developing country relief fund must be a public fund and operated by an organisation registered with the ACNC as a charity.

A public fund provides money or property to support activities carried out by other entities or people, including its sponsoring organisation.

Public fund

To be a public fund,  a developing country relief fund's documents must reflect the following clauses.

Public fund clauses - checklist

Rules and objects of the developing country relief fund

A developing country relief fund must have its own rules and objects. Clauses governing the establishment and administration of a developing country relief fund can be inserted into an organisation's founding documents or can be contained in a separate document, which should be kept with the founding documents.

Sample clause: Objects

The name of the fund is (insert the name of developing country relief fund- the public fund). The purpose of the fund is to solicit and receive gifts towards the carrying out of the objects, which is to deliver development or humanitarian assistance activities (or both) in a developing country and in partnership with entities in the country, based on principles of cooperation, mutual respect and shared accountability.

End of example

Receipts to issue in the name of the developing country relief fund

Sample clause: Receipts

All receipts for gifts or deductible contributions must be issued in the name of the fund.

End of example

Public invited to contribute

A clause is required to state that the public are invited to contribute to the fund.

Sample clause: Public invited to contribute

The general public will be invited to make gifts to the fund, to be used for the purpose of carrying out the objects of the fund.

End of example

Management committee

A clause is required to state that the fund must be managed by members of a committee, and that the majority of committee members must have a degree of responsibility to the community. As a majority is required, the committee must be made up of at least 3 members.

Sample clause: Management committee

A committee of management of no fewer than 3 persons will administer the fund. The committee will be appointed by the organisation. A majority of the members of the committee must be persons having a degree of responsibility to the general community by reason of their occupation or standing in the community.

End of example

Gifts and deductible contributions

Gifts and deductible contributions made to the fund must be kept separate from any other funds of the sponsoring organisation. A separate bank account and clear accounting procedures are required for a public fund.

Sample clause: Gifts and deductible contributions

A bank account will be established to receive all gifts and deductible contributions accepted by the fund. This account must only include any money or property which is a gift or deductible contribution to the fund, or which is received because of such gifts or deductible contributions, including, interest received on any monies in the account. Clear accounting procedures will be maintained.

End of example

If the public fund is also a gift fund, an additional clause is required to the effect that the fund only receives gifts or deductible contributions.

Sample clause: Additional clause if public fund is a gift fund

The fund receives only gifts or deductible contributions and any money received because of those gifts or deductible contributions. The fund does not receive any other money or property.

End of example

Non-profit clause

A clause is required stating that the public fund must operate on a non-profit basis. This is separate to the non-profit clause for the organisation.

Sample clause: Non-profit

The assets and income of the fund shall be applied solely in furtherance of the objects of the fund and no portion shall be distributed directly or indirectly to any individual except as bona fide compensation for services rendered or expenses incurred on behalf of the fund.

End of example

Winding-up clause

A clause is required with words to the effect that, should the developing country relief fund be wound-up, any surplus money or other assets in the fund will be transferred to a charity with a similar charitable purpose to which income tax-deductible gifts can be made.

Sample clause: Winding up

If the fund is wound up, any surplus assets of the fund remaining after the payment of liabilities attributable to it, shall be transferred to a charity with a similar charitable purpose to which income tax-deductible gifts can be made.

End of example

If the public fund is also a gift fund, the winding up clause needs to meet the DGR winding up and revocation requirement.

Sample clause: Winding up and revocation

If the fund is wound up or if the endorsement (if any) of the fund as a deductible gift recipient is revoked, any surplus assets of the fund remaining after the payment of liabilities attributable to it, shall be transferred to a charity with a similar charitable purpose to which income tax-deductible gifts can be made

End of example

ATO advised of changes

An undertaking in writing or the inclusion of a clause in the founding documents is required to the effect that we will be notified of any changes to them, reflecting on the operational or financial arrangements of the fund.

Sample clause: Notify ATO

The Board must notify the Australian Taxation Office of any alterations made to the fund rules.

End of example

Gift fund

A developing country relief fund does not need to maintain a separate gift fund if its public fund receives gifts or deductible contributions only. This is because a public fund may itself satisfy the gift fund requirement if it only receives gifts or deductible contributions and has an appropriate winding up clause.

A developing country relief fund also does not need to maintain a separate gift fund if the organisation operating the developing country relief fund is already endorsed as a DGR as a whole.

Otherwise, an organisation operating the developing country relief fund is required to maintain a separate gift fund.

Not required to maintain a separate gift fund

The public fund winding up clause needs to encompass the event of the revocation of DGR endorsement - to transfer surplus assets to another charity with a similar charitable purpose to which income tax deductible gifts can be made on winding up or revocation of DGR endorsement, whichever is the earlier.

Required to maintain a separate gift fund

A developing country relief fund must use its gift fund for its principal purpose.

The following gift fund requirements must be met:

  • it is a fund
  • it has a name
  • it is maintained and used only for the principal purpose of the developing country relief fund
  • all gifts and deductible contributions of money or property for that purpose are made to it
  • any money received by the organisation, because of such gifts or deductible contributions is credited to it
  • it does not receive any other money or property
  • the organisation is required by a law, its constituent documents or governing rules, to transfer any surplus assets of the gift fund to another gift deductible fund, authority or institution when the organisation is wound up or the DGR endorsement is revoked, whichever occurs first.

Sample DGR winding up and revocation clause

If the developing country relief fund is wound up or if the endorsement (if any) of the developing country relief fund as a deductible gift recipient is revoked, any surplus assets of the gift fund remaining after the payment of liabilities attributable to it, shall be transferred to a charity with a similar charitable purpose to which income tax-deductible gifts can be made.

End of example

Applying to be DGR endorsed

There are 2 ways to apply to be registered as a DGR under Item 9.1.1 - Developing country relief fund or organisation:

  • If you are currently applying for registration as a charity with the Australian Charities and Not-for-profits Commission (ACNC), you can apply to us for DGR endorsement on the ACNC's registration application form – the ACNC will send your DGR application to us once your charity is registered.
  • If you have an ABN, and you're either already registered as a charity or are an Australian government agency, you can complete our Application for endorsement as a deductible gift recipient.

In your application, you will have to include:

  • a completed Developing country relief fund or organisation schedule for deductible gift recipient applicants
  • evidence documents
  • a copy of your constituent or governing documents in either a Word or PDF file format. Image files may cause issues and may delay your application.

After you apply

What you can expect when we process your DGR application:

  • we will contact you to confirm we have received your application, and if we require further information
  • while your application is being processed, donations you receive are not tax deductible
  • after receiving all required information, it may take up to 28 days for us to process your application
  • you will receive a notification of your application outcome in the mail.

Once you are DGR endorsed:

  • your DGR status will be added to the ABN lookupExternal Link on the Australian Business Register so donors can confirm your developing country relief fund or organisation can receive tax-deductible gifts
  • you can update your website or material advising of your tax-deductible status.

Responsibilities of an entity with DGR endorsement

It is important to make sure you are meeting your responsibilities as an entity endorsed as developing country relief organisation or for the operation of a developing country relief fund.

You must keep records that explain all transactions and activities relevant to your entity's status as a DGR.

Your records must show that you have used all your gifts and deductible contributions for your principal purpose.

Receipts for donations must be issued in the name of the public fund or organisation not the gift fund.

You should consider whether you need to be registered for goods and services tax (GST), fringe benefits tax (FBT) or PAYG withholding.

If your organisation is registered with the ACNC you must keep records, report each year to ACNC via the Annual information statementExternal Link, comply with the ACNC’s External Conduct StandardsExternal Link and Governance StandardsExternal Link and tell us if your charity’s details change.

We recommend you conduct a review of your public fund or organisation's eligibility for DGR status each year or when there is a substantial change in your activities. You can use our worksheet to review your DGR status.

You must tell us in writing if your public fund or organisation is no longer entitled to DGR endorsement. You must do this before, or as soon as possible after, the entitlement ends.

Tax-deductible gifts and donations

Once you are DGR endorsed, people who donate to your developing country relief fund or organisation can seek a tax deduction. Donations can be either money or property.

There are some requirements donations need to meet to be tax deductible.

The donation must be a gift, not a contribution:

  • A gift is where a donor does not receive a material benefit in return (for example, a donor puts $5 in a collection box).
  • A contribution is where a donor receives a material benefit in return (for example, membership fees or purchasing a ticket to a fundraising dinner).

If you provide the donor with a small token of appreciation for their donation – such as a sticker, or a mention in a newsletter – the donation can still be considered a gift. However, if your acknowledgment is larger and the donor can use or benefit from it, this may prevent the donation being considered a gift.

It is the responsibility of the donor to determine whether the donation is a tax-deductible gift.

The types of donations that can be tax deductible gifts include:

  • money of $2 or more
  • property, that is purchased during the 12 months before making the gift, or that we value at more than $5,000
  • trading stock.

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