The complete introductory guide to deductible gift recipients (DGR) - Part 1

23 Apr 2020
Part 1 - Let's get a handle on this thing!

If you are wondering what deductible gift recipient (DGR) endorsement is all about, then go no further!

Over three parts, this guide will:

  • explain what DGR endorsement is;
  • list the broad categories of DGR;
  • explain the difference between type 1 (DGR1) and type 2 (DGR2);
  • explain the difference between whole of organisation endorsement and part endorsement;
  • give some helpful tips for applying for DGR endorsement;
  • explore the question of how important DGR endorsement really is; and
  • provide the main reasons why some organisations obtain DGR endorsement and why others don't.

Part one focuses mostly on what DGR endorsement is, why organisations like to have it and other general background information that will help you get a better understanding of Australia's rather complicated DGR regime. Painting the landscape I suppose you might say!

Part two looks at the different types and categories of DGR and why you might not need it after all, while part three focuses more on the practical side of things and gives more detail on applying for DGR endorsement and explains why you might not be successful and what to do about it if your application is declined.

1. The intro bit

This guide will give you a good grounding in what this DGR thing is all about. But as you will come to see, it is a rather complicated area of the charity world. So, please treat this as a thorough intro, rather than the complete story!

Initial Note: it is the Australian Taxation Office (ATO) that will assess your application for DGR endorsement, even if the information is collected by or filtered through another government agency such as the Australian Charities and Not-for-profits Commission (ACNC).

Tip: We strongly recommend you spend some time reading up on DGR before launching into an application for endorsement. Time spent on learning and preparation can help boost the chances of success. A good place to start is the ATO's not-for-profit pages found by visiting, in particular, the ATO publication entitled 'Gift Pack for deductible gift recipients and donors'. It is the ATO after all that will be assessing the application, so why not see what it has to say about it?!

Tip: Like with many things, you can save time and effort, and maybe even increase your chances of success, by asking someone else to help you with your application for DGR endorsement. But make sure that those helping you are suitably experienced in the laws and regulations relating to charities and to DGR in particular and are up to date with regulatory reform in this space. One DGR category or another, or even the whole DGR regime, comes under review reasonably often and so it is important to be up to date with the most recent changes. If you have any questions about achieving DGR endorsement, feel free to reach out to our charities experts here.

Before reading on, please note:

  • in almost all cases the applicant needs to be registered as a charity with the ACNC in order to be eligible for DGR endorsement. There are exceptions, aren't there always!, but this is a good rule of thumb. For more on how to register as a charity, keep an eye out for our article on registration. In the meantime, you can also visit the ACNC website here for more information.
  • being endorsed as a DGR does not give your organisation access to income tax and fringe benefits tax (FBT) concessions – a separate process is required to access these concessions and we'll be posting an article on that soon. In the mean time, you can visit the ACNC website here and the ATO non-profit website here for more information.
  • even if your organisation is endorsed as a DGR, you will, in most cases, still require a charitable fundraising authority if the organisation wishes to engage in charitable fundraising activities take a look at our article on fundraising, the relevant Fair Trading or Consumer Affairs body in each state and territory for more information). 
  • if your organisation wishes to conduct raffles, lotteries or other games of chance, you may require a license to do so regardless of whether your organisation is a DGR (check out our article on DGRs here), the relevant gaming and racing authority in each state and territory for more information.

Important note: The ACNC opened its doors on 3 December 2012. As part of the ushering in of this new regulator of charities, certain transitional arrangements were put in place to give DGR endorsed organisations time to make whatever changes may have been required to comply with the amendments to some DGR general categories. This transition period expired in late 2013, so this 'get out of gaol (or is it jail) free card' has well and truly expired!
If you are unsure of whether your organisation still complies with the particular requirements associated with the particular DGR category under which it is endorsed, we strongly recommend you conduct a self-audit/review as soon as possible. The ATO recommends that you self-review your organisation as follows:

Step 1: Find your organisation's notice of DGR endorsement and note the number advised at 'Item(s) in Subdivision 30-B of the Income Tax Assessment 1997' on the notice.

Step 2: Check that your organisation meets the description of the item number in the DGR table in the ATO's Gift Pack including any requirement for the fund, authority or institution to be either:

  • an Australian government agency; or
  • a charity or part of a charity registered with the ACNC.

Failure to comply with the applicable DGR requirements could result in the loss of DGR endorsement.

If you would like some help with a DGR audit/review, just contact us and we will be happy to help.

Right, so, now let's get on with it!

2. What is DGR?

2.1 Overview

DGR is often heralded as an absolute necessity, a deal breaker the holy grail, for not-for-profit organisations. But what exactly is DGR?

DGR is the abbreviation for deductible gift recipient. In very broad terms, organisations with DGR endorsement can, as the name suggests, receive tax deductible gifts. That is, people who donate to the DGR can deduct the value of the gift from their own personal income, and thereby reduce their income tax liability. You know, you see it all the time, "any donation of $2 or more is tax deductible ...".

But beware, it is not quite that simple. There are strict rules about what is and what is not tax deductible. 

To become DGR endorsed you must be more than a not-for-profit and more than a registered charity. You must be endorsed as such by the Australian Taxation Office (ATO) or be specifically listed as a DGR in the income tax law, but more about that later.

2.2 Why is DGR desirable?

Before going on to explain how to apply for DGR endorsement, it is important to understand why this endorsement is so highly sought after. An organisation will usually seek DGR endorsement for one or more of the following reasons:

  • attracts gifts – endorsement permits an organisation to receive "deductible gifts" and "deductible contributions", and thereby enables the giver to receive an income tax deduction;
  • opens the door to grants and other philanthropic contributions – endorsement is needed to seek and receive gifts and grants from those philanthropic donors that, due to law or internal policy, can only give to DGRs; and
  • can give credibility – endorsement can give a certain degree of credibility to the organisation in the eyes of donors and the general public.

So, now that you know about what DGR is, jump to part two for more information on the different types and categories of DGR and to learn why you might not even need DGR after all.

Author: Darren Fittler
Darren Fittler is one of Australia's leading lawyers specialising in serving charity and not-for-profit organisations for more than 15 years.

You can find out more about Darren Fittler here.