There are more than 50 different categories of DGR endorsement grouped under the broad headings of:
- sport and recreation
- public and private ancillary funds
- welfare and rights
- fire and emergency services
- the family
- international affairs.
Each of the above broad categories house a number of DGR options, each of which has its own eligibility and ongoing compliance requirements.
Many of the DGR categories are assessed and administered by the ATO but some are assessed and administered by other government agencies, for example:
- the Department of Foreign Affairs and Trade administers overseas aid funds
- the Department of Social Services administers harm prevention charities
- the Department of the Environment administers environmental organisations through the Register of Environmental Organisations (REO)
- the Office for the Arts within the Attorney-General's Department administers cultural organisations through the Register of Cultural Organisations (ROCO).
Government names and responsibilities seem to change with common regularity , so the names listed above may change from time to time.
DGR endorsement can be for:
- the entire organisation – often referred to as 'whole of organisation endorsement'; and
- a part or subset of the organisation, often referred to as 'endorsement for the operation of a fund, authority or institution'.
3.2 Whole of organisation DGR endorsement
If you would like to receive tax deductible gifts and contributions to fund and support the full scope of work that your organisation does, then 'whole of organisation' endorsement is what you want! It is kind of self-explanatory. An organisation with whole of organisation DGR endorsement is endorsed to receive tax deductible gifts for all of what it does. That is, there is no need to isolate tax deductible gifts from the organisation's other money – though you may choose to continue to track and identify the DGR funds received through your accounting lines, and you may in fact be required to under the terms of a funding grant.
This will all make a little more sense once you contrast it with part DGR endorsement, discussed below.
The main whole of organisation endorsement categories are:
- public benevolent institution (PBI)
- health promotion charity (HPC)
- charitable services institution (CSI) – and no, has nothing to do with Crime Scene Investigation!
3.3 Endorsement to operate a DGR – part endorsement
Sometimes it is not possible to receive DGR endorsement for the entire scope of activities that your organisation is doing, or hopes to do. But don't give up!
It is sometimes possible for a part, or portion, of what your organisation is doing to be eligible to receive tax deductible gifts or contributions.
- The most common funds for which an organisation is endorsed as a DGR to operate are:
school/college building funds;
- scholarship funds;
- public library funds;
- developing country relief funds (also known as 'overseas aid funds'); and
- necessitous circumstances funds.
Then, just to make things a little more complicated, some categories of DGR require an organisation to be listed on a particular register maintained by a government department and to operate a public fund. See part 5.7 for a little more detail.
3.4 DGR 1 and DGR 2
When referring to deductible gift recipients, you may see or hear the terms "type 1" and "type 2" DGR (or DGR1 and DGR2). These terms stem from where the related legal provisions are located in the Income Tax Assessment Act 1997 (Cth).
But rather than get bogged down in the tax law, what you really need to know is that these terms relate mainly to how the money received by the organisation can be used.
(a) DGR 1
While perhaps an over-simplification, broadly speaking, a DGR1 is an entity that directly engages in activities (a 'doer' you could say). The vast majority of organisations that are endorsed as a DGR will be a type 1 DGR.
(b) DGR 2
On the other hand a type 2 DGR fulfils its own purpose by empowering and supporting other organisations – through the giving of grants for instance (a 'giver' you might say). DGR2 organisations are generally only allowed to give funds and support to DGR1 entities. Public ancillary funds and private ancillary funds are examples of DGR2 entities.