Deductible gift recipient categories extended to community sheds15 October 2020 Authored by: Hana Williams, Carly Ashwood | Topics: Not-for-profit, Tax and revenue
From 1 October 2020, a new deductible gift recipient (DGR) category became available to community sheds. This article sets out some of the more important considerations for community sheds looking to obtain DGR status.
New deductible gift recipient category
Deductible gift recipients (DGRs) can receive tax deductible gifts and contributions from the public. If a donation is tax deductible, donors can deduct the amount of their donation from their taxable income when lodging their tax returns. For these reasons, DGR status is appealing to many organisations.
The Income Tax Assessment Act 1997 (Cth) has been amended to introduce a new DGR category for community sheds.
Community sheds must meet the following criteria to be eligible for DGR status:
(a) have the characteristics of a community shed (set out below)
(b) be located in Australia
(c) be registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC)
(d) have a DGR winding up and revocation clause in their governing documents.
To be classified as a community shed, an organisation must be a public institution that:
(a) has dominant purposes that advance mental health and prevent or relieve social isolation
(b) seeks to achieve those purposes principally by providing a physical location where it supports individuals to undertake activities, or work on projects in the company of others
(i) has no membership criteria, or
(ii) has membership criteria that relate only to gender and/or Indigenous status (where membership is, for cultural reasons, only open to Indigenous persons).
The new DGR category came into effect on 1 October 2020. Practically, the amendments apply to gifts and contributions made on or after 1 July 2020, provided the community shed obtains DGR status in the 2020/2021 financial year.
What should community sheds looking to gain DGR status consider?
Community sheds need to ensure they are eligible for registration (or already registered) as a charity with the ACNC.
Organisations looking to apply to become a charity will need to review their structure and governing document to ensure compliance with the ACNC’s requirements.
To gain DGR status as a community shed, an organisation’s governing document must clearly demonstrate that its dominant purpose is to advance mental health and prevent/relieve social isolation. An organisation will also need to show how it supports this dominant purpose. The following initiatives are examples of how support can be shown:
- supporting members to understand mental health, for example by inviting guest speakers to discuss mental health issues
- facilitating activities that promote social connections among members
- welcoming people in the wider community to join the shed’s activities.
Organisations should also consider fundraising requirements before soliciting donations from the public. Generally, organisations need to hold a registration or licence to fundraise before undertaking fundraising activities. There are some limited exceptions to this requirement.
For more information on registration as a charity or obtaining DGR status, please contact Carly Ashwood or Adelaide Hayes.