The complete introductory guide to deductible gift recipients (DGR) - Part 3

Part 3 - Time for the practical

Welcome to part three of the complete introductory guide to deductible gift recipients (DGR). We are on the final stretch!

If you missed the first two parts you can check out:

  • Part one to get a handle on what DGR endorsement is, why organisations like to have it and other general background information; and
  • Part two where we dig a little deeper and explore whether you actually need DGR endorsement at all, describe the different categories of DGR, the difference between type 1 (DGR1) and type 2 (DGR2) and the difference between whole of DGR endorsement and, what might loosely be called, part endorsement.


This part, part three, focuses more on the practical side of things and:

  • gives more detail about applying for DGR endorsement and
  • explains why you might not be successful and what to do about it if your application is declined. 


Let's get busy!

5. Applying for DGR endorsement

5.1 Overview

Many people working in, or wanting to establish, a NFP are convinced that the organisation must be endorsed as a DGR and that because the new entity is not-for-profit and is doing "good" things, obtaining such endorsement will be a matter of simply completing out and lodging some forms. While in some cases DGR endorsement will be granted on the basis of the application forms alone, it is often helpful to provide further submissions on why the organisation is entitled. Explanatory submissions and other supporting materials are particularly helpful if the purpose of the organisation and the way it pursues that purpose does not neatly fit squarely within the specified legal requirements or government policies. With this in mind, DGR endorsement can be more difficult to obtain than first expected.

It will come of know surprise for you to hear that we are ready and happy to help if you get a little stuck. Just get in touch.

5.2 Eligibility and application for endorsement as a DGR

Generally speaking, to be eligible for DGR endorsement, an organisation must:

  • be not-for-profit and have a provision within its governing rules (e.g. its constitution or trust deed) that compels the organisation to give any surplus assets to another DGR on its winding up;
  • subject to certain exemptions, be registered as a charity with the ACNC – a process that has its own specific requirements;
  • subject to certain exemptions, be in Australia; and
  • satisfy the specific criteria for the category of DGR under which it is seeking DGR endorsement.

In addition some DGR category types require the establishment and maintenance of a 'gift fund'. Keep an eye out for our article on this (coming soon) but in the mean time, you can see the ATO website for more on gift funds.

For the majority of DGR categories, the application is made to the ATO. However, some DGR categories such as harm prevention charities, cultural organisations, environmental organisations and overseas aid funds require applications to be made to specific Commonwealth Government departments first before applying to the ATO.

5.3 Where do I apply for DGR endorsement?

While DGR endorsement is assessed and determined by the Australian Taxation Office (ATO), since the establishment of the Australian Charities and Not-for-profits Commission (ACNC) in December 2012, a couple of additional pathways to DGR now exist. Where you apply and what forms you use will vary depending on which of the following scenarios apply:

  • you are applying for DGR endorsement at the same time as applying to be registered as a charity with the ACNC (see part 5.4);
  • you are already registered as a charity with the ACNC but now want to be endorsed as either a health promotion charity or a public benevolent institution (see part 5.5);
  • you wish to be endorsed as a DGR under a category of DGR administered by the ATO other than health promotion charity or PBI (see part 5.6);
  • you are an organisation that wishes to be endorsed as a DGR under a category that is administered by a government department other than the ATO (see part 5.7); or
  • you do not fit within a DGR category and have exhausted all other avenues (see part 5.8).


The different processes are partly because once an Australian Business Number (ABN) has been used to register a charity with the ACNC, the same ABN cannot be used again through the ACNC's online portal and partly because the ACNC does not yet have interdepartmental arrangements in place with the other government bodies and agencies that administer some DGR categories.

5.4 Applying for DGR endorsement at the same time as registering as a charity

If your organisation is not yet registered as a charity, you can do so online through the ACNC's online application form by going to http://www.acnc.gov.au and following the 'Register my charity' link. This form, and accompanying guide, also enables you to apply for certain types of DGR endorsement and includes the facility to upload documents with the application.

The ACNC will pass on the DGR application component of the online form to the ATO. The ATO will then contact you if needed.

5.5 Registered charities applying for DGR endorsement as a public benevolent institution or health promotion charity

If you are already registered as a charity with the ACNC and you wish to apply for DGR endorsement as a health promotion charity (HPC) or as a public benevolent institution (PBI), then you will need to change your charity subtype with the ACNC. To change your charity subtype, you will basically need to go through the process of registering as a charity all over again, and this time provide the relevant information supporting why you should be registered as a charity under the PBI or HPC subtype.


If you happen to be an organisation that is endorsed as a PBI or HPC but only for income tax and FBT exemption purposes – that is, not as a DGR, then any application for DGR endorsement under these categories will need to be made through the ATO.

Information relating to DGR endorsement collected as part of the ACNC application process will be provided to the ATO. The ATO will then contact you if needed.

5.6 Applying for DGR endorsement under an ATO administered DGR category other than PBI and HPC

If your organisation is registered as a charity with the ACNC and wish to apply for the same organisation to be endorsed for the purpose of operating a fund (such as a school building fund), then you will need to apply to the ATO directly.
If however, you wish to establish a new entity (including a trust) to house the fund and this new entity will have its own ABN, then you can use this new ABN to apply for registration as a charity with the ACNC and apply for DGR endorsement at the same time as described at 5.4.

If you are a not-for-profit organisation that is not charitable then you can apply for endorsement direct with the ATO. Note however that many DGR categories require you to be registered as a charity with the ACNC to be eligible for DGR endorsement.

5.7 Applying for DGR under a category not administered by the ATO.

Certain categories of DGR are administered by other Government departments. Namely:

  • 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 Ministry for the Arts within the Attorney-General's Department administers cultural organisations through the Register of Cultural Organisations (ROCO).

If you are applying for DGR endorsement under any of these categories then you will need to use the application forms and follow the guidelines provided by the relevant Government department.

5.8 Specific listing in the income tax law

If your organisation is not eligible for endorsement as a DGR under one of the pre-existing DGR categories, not all is lost!

While a long and winding path, you may decide that it is worthwhile pursuing DGR endorsement through a process known as 'specific listing' (also referred to as 'special listing').

As the phrase suggests, the outcome of 'specific listing' is the specific inclusion of your organisation's name in the relevant Commonwealth tax laws (namely the Income Tax Assessment Act 1997 (Cth)).

Because this pathway requires an actual amendment to the income tax act , it is often more of a political, than a legal, process and commonly takes in excess of 12 to 18 months. Even then, success is far from guaranteed.

Tip: The support of the Commonwealth Government minister responsible, through his or her respective portfolio, for the type of activities and purposes of the organisation seeking listing is often key to success. For example, an environmental organisation that has explored and exhausted all other DGR endorsement options and believes that, despite there being no DGR category relevant to its purposes, should be eligible for endorsement, is likely to need the support of the Commonwealth Government minister responsible for the environment.

5.9 Tips for DGR endorsement applications

While you might neatly meet the DGR criteria for which you are applying and might gain endorsement based on the forms and other required documents alone, we often recommend that you provide additional submissions by way of a cover letter. Such additional submissions should be provided particularly if:

  • the application form(s) do not provide enough space to properly answer the questions; and/or
  • you do not, on the face of it, neatly fit the exact criteria and need to explain why you do.

It is often helpful for submissions supporting a DGR endorsement application to set out each of the criteria under separate headings. You can then address them one by one, including, where available and relevant, references to:

  • legislation and case law;
  • taxation rulings, taxation determinations and other ATO guides and policies;
  • relevant extrinsic materials such as government reports, government policies, academic writings, newspaper and journal articles and expert reports;
  • documents relating to the organisation itself such as annual reports and brochures about its services; and
  • letters of support from politicians, business people and well-recognised public figures and written testamentary of those who have benefited from the work of the organisation. Particular care should be taken, however, when using material of this nature, as the author may not understand the intricacies of what endorsement requires and can damage, rather than support, your application.

The purposes of your organisation are also key. But remember that it is not just what an organisation says it will do, it is what it actually does, that will directly affect whether it is granted endorsement and whether it lawfully maintains it. To avoid this situation, it is a good idea to:

  • really drill down and work out what your organisation's true and core purpose is; and
  • determine whether there is a DGR category that fits, or almost fits this purpose.

Itis not so helpful to review the various categories and types of endorsement first and then change the organisation's purpose to fit the criteria for the identified endorsement.

It is one thing for you to, for instance, change the language used to express the purposes of the organisation to more closely align with the requirements of the DGR endorsement you are seeking. It is another thing altogether, and one that is ill advised, to adopt an approach that is inconsistent with your organisation's philosophy and desire for the sake of endorsement. If you follow the latter path and are granted endorsement, you could very well find yourself in breach of such endorsement as your organisation moves forward doing what it initially intended.

6. Unsuccessful DGR endorsement applications

6.1 Overview

Many people working in, or wanting to establish, a NFP are convinced that the organisation must be endorsed as a DGR and that because the new entity is not-for-profit and is doing "good" things, obtaining such endorsement will be a matter of simply completing out and lodging some forms. While in some cases DGR endorsement will be granted on the basis of the application forms alone, it is often helpful to provide further submissions on why the organisation is entitled. Explanatory submissions and other supporting materials are particularly helpful if the purpose of the organisation and the way it pursues that purpose does not neatly fit squarely within the specified legal requirements or government policies. With this in mind, DGR endorsement can be more difficult to obtain than first expected.

It will come of no surprise for you to hear that we are ready and happy to help if you get a little stuck. Just get in touch.

6.2 Eligibility and application for endorsement as a DGR

Generally speaking, to be eligible for DGR endorsement, an organisation must:

  • be not-for-profit and have a provision within its governing rules (e.g. its constitution or trust deed) that compels the organisation to give any surplus assets to another DGR on its winding up;
  • subject to certain exemptions, be registered as a charity with the ACNC – a process that has its own specific requirements;
  • subject to certain exemptions, be in Australia; and
  • satisfy the specific criteria for the category of DGR under which it is seeking DGR endorsement.

In addition some DGR category types require the establishment and maintenance of a 'gift fund'. Keep an eye out for our article on this (coming soon) but in the mean time, you can see the ATO website for more on gift funds.

For the majority of DGR categories, the application is made to the ATO. However, some DGR categories such as harm prevention charities, cultural organisations, environmental organisations and overseas aid funds require applications to be made to specific Commonwealth Government departments first before applying to the ATO.

6.3 Where do I apply for DGR endorsement?

While DGR endorsement is assessed and determined by the Australian Taxation Office (ATO), since the establishment of the Australian Charities and Not-for-profits Commission (ACNC) in December 2012, a couple of additional pathways to DGR now exist. Where you apply and what forms you use will vary depending on which of the following scenarios apply:

  • you are applying for DGR endorsement at the same time as applying to be registered as a charity with the ACNC (see part 5.4);
  • you are already registered as a charity with the ACNC but now want to be endorsed as either a health promotion charity or a public benevolent institution (see part 5.5);
  • you wish to be endorsed as a DGR under a category of DGR administered by the ATO other than health promotion charity or PBI (see part 5.6);
  • you are an organisation that wishes to be endorsed as a DGR under a category that is administered by a government department other than the ATO (see part 5.7); or
  • you do not fit within a DGR category and have exhausted all other avenues (see part 5.8).

The different processes are partly because once an Australian Business Number (ABN) has been used to register a charity with the ACNC, the same ABN cannot be used again through the ACNC's online portal and partly because the ACNC does not yet have interdepartmental arrangements in place with the other government bodies and agencies that administer some DGR categories.

6.4 Applying for DGR endorsement at the same time as registering as a charity

If your organisation is not yet registered as a charity, you can do so online through the ACNC's online application form by going to http://www.acnc.gov.au and following the 'Register my charity' link. This form, and accompanying guide, also enables you to apply for certain types of DGR endorsement and includes the facility to upload documents with the application.

The ACNC will pass on the DGR application component of the online form to the ATO. The ATO will then contact you if needed.

6.5 Registered charities applying for DGR endorsement as a public benevolent institution or health promotion charity

If you are already registered as a charity with the ACNC and you wish to apply for DGR endorsement as a health promotion charity (HPC) or as a public benevolent institution (PBI), then you will need to change your charity subtype with the ACNC. To change your charity subtype, you will basically need to go through the process of registering as a charity all over again, and this time provide the relevant information supporting why you should be registered as a charity under the PBI or HPC subtype.


If you happen to be an organisation that is endorsed as a PBI or HPC but only for income tax and FBT exemption purposes – that is, not as a DGR, then any application for DGR endorsement under these categories will need to be made through the ATO.

Information relating to DGR endorsement collected as part of the ACNC application process will be provided to the ATO. The ATO will then contact you if needed.

6.6 Applying for DGR endorsement under an ATO administered DGR category other than PBI and HPC

If your organisation is registered as a charity with the ACNC and wish to apply for the same organisation to be endorsed for the purpose of operating a fund (such as a school building fund), then you will need to apply to the ATO directly.
If however, you wish to establish a new entity (including a trust) to house the fund and this new entity will have its own ABN, then you can use this new ABN to apply for registration as a charity with the ACNC and apply for DGR endorsement at the same time as described at 5.4.

If you are a not-for-profit organisation that is not charitable then you can apply for endorsement direct with the ATO. Note however that many DGR categories require you to be registered as a charity with the ACNC to be eligible for DGR endorsement.

6.7 Applying for DGR under a category not administered by the ATO.

Certain categories of DGR are administered by other Government departments. Namely:

  • 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 Ministry for the Arts within the Attorney-General's Department administers cultural organisations through the Register of Cultural Organisations (ROCO).

If you are applying for DGR endorsement under any of these categories then you will need to use the application forms and follow the guidelines provided by the relevant Government department.

6.8 Specific listing in the income tax law

If your organisation is not eligible for endorsement as a DGR under one of the pre-existing DGR categories, not all is lost!

While a long and winding path, you may decide that it is worthwhile pursuing DGR endorsement through a process known as 'specific listing' (also referred to as 'special listing').

As the phrase suggests, the outcome of 'specific listing' is the specific inclusion of your organisation's name in the relevant Commonwealth tax laws (namely the Income Tax Assessment Act 1997 (Cth)).

Because this pathway requires an actual amendment to the income tax act , it is often more of a political, than a legal, process and commonly takes in excess of 12 to 18 months. Even then, success is far from guaranteed.

Tip: The support of the Commonwealth Government minister responsible, through his or her respective portfolio, for the type of activities and purposes of the organisation seeking listing is often key to success. For example, an environmental organisation that has explored and exhausted all other DGR endorsement options and believes that, despite there being no DGR category relevant to its purposes, should be eligible for endorsement, is likely to need the support of the Commonwealth Government minister responsible for the environment.

6.9 Tips for DGR endorsement applications

While you might neatly meet the DGR criteria for which you are applying and might gain endorsement based on the forms and other required documents alone, we often recommend that you provide additional submissions by way of a cover letter. Such additional submissions should be provided particularly if:

  • the application form(s) do not provide enough space to properly answer the questions; and/or
  • you do not, on the face of it, neatly fit the exact criteria and need to explain why you do.

It is often helpful for submissions supporting a DGR endorsement application to set out each of the criteria under separate headings. You can then address them one by one, including, where available and relevant, references to:

  • legislation and case law;
  • taxation rulings, taxation determinations and other ATO guides and policies;
  • relevant extrinsic materials such as government reports, government policies, academic writings, newspaper and journal articles and expert reports;
  • documents relating to the organisation itself such as annual reports and brochures about its services; and
  • letters of support from politicians, business people and well-recognised public figures and written testamentary of those who have benefited from the work of the organisation. Particular care should be taken, however, when using material of this nature, as the author may not understand the intricacies of what endorsement requires and can damage, rather than support, your application.

The purposes of your organisation are also key. But remember that it is not just what an organisation says it will do, it is what it actually does, that will directly affect whether it is granted endorsement and whether it lawfully maintains it. To avoid this situation, it is a good idea to:

  • really drill down and work out what your organisation's true and core purpose is; and
  • determine whether there is a DGR category that fits, or almost fits this purpose.

It is not so helpful to review the various categories and types of endorsement first and then change the organisation's purpose to fit the criteria for the identified endorsement.

It is one thing for you to, for instance, change the language used to express the purposes of the organisation to more closely align with the requirements of the DGR endorsement you are seeking. It is another thing altogether, and one that is ill advised, to adopt an approach that is inconsistent with your organisation's philosophy and desire for the sake of endorsement. If you follow the latter path and are granted endorsement, you could very well find yourself in breach of such endorsement as your organisation moves forward doing what it initially intended.

7. What can I do if my DGR application is declined?

After submitting an application for DGR endorsement it would be very rare indeed for the next communication to be a rejection letter.

In our many years of experience we can safely say that the usual path is for the relevant Government department to contact you for additional information to expand or clarify what you have provided. This means that in most cases you will be given the opportunity to flesh out your application and to bolster any areas that the assessor may feel are week or unclear.

While receiving a "yes" right out of the gate is what you are hoping for, don't worry if you are asked to provide additional information - many organisations are asked to do this, not just you!


Tip: Shift a request for further information to your favour. By carefully considering what the assessor is asking for, you can get an insight into what the concerns might be and can therefore take extra care to alleviate those concerns in the next round of your submissions.

If, having been through the information gathering process, your application is declined (or rejected), don't worry. it is not the end of the road.

Tip: If your application is declined, try to look at things objectively (or seek advice). On balance, it may well be that you are not eligible for DGR endorsement in which case, you will need to soldier on without it – which many charities do. There may also be an opportunity to isolate/ring-fence a portion of what you do and to be endorsed as a DGR for the operation of this particular part of your organisation.

Feel free to reach out if you would like help with reviewing an application that has been declined. We would love to help!

If, having carefully considered the reasons why your application has been declined, you would like to appeal the decision, then you have an escalating set of options. While the exact process and protocol will vary depending on which Government Department you are dealing with, your options are likely to be:

  • Step 1 – request an internal review of the decision;
  • Step 2 – if the internal review is unsuccessful, appeal to the Administrative Decisions Tribunal (AAT); or
  • Step 3 – if you are unsuccessful at the AAT, appeal to the courts – starting at the Federal Court.

The information provided by the ACNC on the review and appeal of decisions is rather good and is relevant in the context of DGR if you are applying for endorsement as a public benevolent institution or a health promotion charity. Check out the ACNC website on decisions and appeals.

And that, as they say, is a wrap! What started out as a little intro article as morphed into a rather substantial guide. We hope you enjoyed the journey and learnt a thing or two along the way!

Feel free to share your thoughts and comments below. You can also contact us if you have any questions.

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.