This Bills Digest replaces a preliminary Digest dated 1 December 2022.
Introductory Info
Date introduced: 30 November 2022
House: House of Representatives
Portfolio: Treasury
Commencement: The first 1 January, 1 April, 1 July or 1 October after Royal Assent.
Purpose and history of the Bill
The purpose of the Treasury
Laws Amendment (2022 Measures No. 5) Bill 2022 (the Bill) is to update the
list of Deductible Gifts Recipients (DGR) in the Income Tax
Assessment Act 1997 (ITAA 1997) by adding six new DGRs,
extending two existing DGRs and removing one DGR that no longer operates. DGR
status allows members of the public to receive income tax deductions for the
gifts to the listed organisations.
The provisions in the Bill were originally introduced as
Schedule 7 to the Treasury
Laws Amendment (2022 Measures No. 4) Bill 2022 (the Measures No. 4 Bill).
Background
What is a
DGR?
Deductible Gift Recipient (DGR) status allows an entity to
receive tax deductible gifts and contributions from the public. Donors can
claim an income tax deduction for donations of $2 or more to a DGR.[1]
This mechanism encourages philanthropy and provides support to the
not-for-profit sector.
DGRs are either listed by name in Division 30 of the ITAA
1997; or in one of the general categories set out primarily in Subdivision
30-B of the ITAA 1997 as being entitled to receive tax deductible gifts.
Organisations that are not specifically named in Division 30 must be endorsed
by the Australian Taxation Office (ATO) under Subdivision 30-BA of the ITAA
1997, or must be owned or controlled by an endorsed entity or government
entity.[2]
There are currently 52 general categories of DGR set out
in Division 30 of the ITAA 1997. Of these categories, 48 are currently
administered by the ATO and 4 are currently administered by portfolio agencies.[3]
Not-for-profit
sector: roles and responsibilities of the ACNC, ATO and the Treasury
With effect from 14 December 2021, the Treasury Laws
Amendment (2021 Measures No. 2) Act 2021 requires organisations in
the general categories to be a registered charity or an Australian government
agency, or be operated by a registered charity or an Australian government
agency, to be entitled to DGR endorsement.[4]
ACNC
The Australian
Charities and Not-for-profits Commission (ACNC) administers the regulatory
system for the not-for-profit sector. One of the ACNC’s roles is to register
organisations as charities.[5]
Its website
further explains:
- Not all charities are eligible for
DGR endorsement.
- Most DGR categories require
registration with the ACNC first.
- The ACNC decides on charity
registration.
- The Australian Taxation Office
(ATO) decides on DGR endorsement.
- You can apply for charity
registration and DGR endorsement in the ACNC's online registration form.
ATO
The ATO is responsible for deciding eligibility for the tax
concessions such as DGR
status, income tax exemption, GST
charity concession, Fringe
Benefit Tax (FBT) exemption, FBT rebate and refunds
of franking credits. An entity is entitled to be endorsed by the ATO as a
DGR if it satisfies the
conditions in section 30-125 of the ITAA 1997. The procedural
rules relating to endorsement of charities (such as application for and
revocation of endorsement, and entry of the details of endorsement on the
Australian Business Register) are provided under Division 426 of Schedule 1 to
the Taxation
Administration Act 1953 (TAA).
Two ways to
seek DGR endorsement
According to the
Treasury:
There are two ways to apply for DGR endorsement with the ATO:
-
If you are currently applying for
registration with the Australian Charities and Not-for-profits Commission
(ACNC), you can apply to the ATO for DGR endorsement on the ACNC registration application form.
-
If you already have an ABN, and
you are either registered as a charity or are not required to be for DGR endorsement,
you need to lodge a separate application form.
Treasury
The Treasury
further explains
Applying for DGR status under the specific listing process
Before applying for specific listing, entities should contact
the ATO to establish if they are eligible under a general category. If your
entity does not fit into any of the DGR categories administered by the ATO, it
may apply to be specifically listed in legislation.
Specific listing is only available in exceptional
circumstances and involves assessment by the Treasurer, followed by the
government approving an amendment to the tax law. Of around 28,000 entities
with DGR status, only around 200 are specifically listed. Applicants must meet
a high bar to merit listing by name in the tax law.
Your entity must be not-for-profit and its application will
be viewed more favourably if your entity is a registered charity with the
Australian Charities and Not-for-profits Commission (ACNC).
ABN Lookup
The ABN Lookup website
provides information on whether an entity is a DGR and, if it is, one of the
following two types of DGRs to which it belongs:
- an entity that has DGR endorsement in its own right
- an entity that is only a DGR in relation to a fund, authority or
institution it operates. In this instance, only gifts to the fund, authority or
institution are tax deductible.
Successful
or unsuccessful DGR Applications
According to the Treasury
website:
It generally takes around two years to process an application
and amend the tax law, depending on the priorities of the Government’s
legislation program. An overview of the steps involved is at Figure 1 below.
Figure 1 Deductible
Gift Recipient Process
Source: Treasury, Deductible Gift Recipient specific listing
applications.
If the Government approves your entity’s request, an
announcement will likely be made in the Federal Budget or in the Mid-Year
Economic and Fiscal Outlook. Your entity will also be notified via letter.
However, your entity will not be a DGR until:
-
your entity’s governing documents
contain appropriate public fund rules; and
-
the tax law has been amended to
specifically list your entity.
The ATO provides assistance to successful entities to meet
the public
fund requirements.
A DGR specific listing is not an administrative decision, but
a legislative matter that requires an Act of Parliament. Merit review is not
available.
Committee consideration
Senate
Economics Legislation Committee
The Measures No. 4 Bill (including Schedule 7) was
referred to the Senate
Economics Legislation Committee (the Economics Committee) for inquiry and
report by 25 January 2023.[6]
On 22 December 2022, the Economics
Committee tabled a progress report seeking an extension of time to report to 3
March 2023.
At the time of writing this Digest, nine submissions
have been published online by the Committee. However, none of them contained
comments about Schedule 7 of the Measures No. 4 Bill, which is replicated in
the current Bill.
The current Bill has not been referred to a committee for
inquiry.
Senate Standing Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills had
not considered the Bill at the time of writing this Digest.
Statement of Compatibility
with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed
the Bill’s compatibility with the human rights and freedoms recognised or
declared in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[7]
Parliamentary Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights had not
considered the Bill at the time of writing this Digest.
Key issue and provisions
Key issue
The key issue is to maintain flexibility in the
not-for-profit tax system in order to achieve the Government’s ‘goal
of doubling philanthropy by 2030.’[8]
Key provisions
The Bill updates the list of DGRs in Subdivision 30-B of
the ITAA 1997 by:
- adding
six entities as new DGRs
- extending
the end dates for two current DGRs
- removing
one DGR which is no long in operation.
Table 1 below summarises the proposed changes to the list
of DGRs in Subdivision 30-B by items 1 to 5 of the Bill.
Table 1 Proposed changes to the legislative
list of DGRs in Subdivision 30-B ITAA 1997
Source: Parliamentary Library’s analysis: Schedule 1 to the Treasury
Laws Amendment (2022 Measures No. 5) Bill 2022.
Items 6 to 11 of the Bill consequently amend the
Index to Division 30 (Gifts or contribution) under section 30-315 of the ITAA
1997 to reflect the changes proposed by items 1 to 5.
Retrospective
dates of effect
According to the Explanatory
Memorandum (p. 9):
The amendments apply retrospectively. This ensures that if
gifts were made prior to the commencement of this Schedule they may be tax
deductible for income tax purposes, provided they comply with other
requirements of the income tax law. Accordingly, despite the retrospective
application of deductible gift recipient status there is no adverse impact on
affected parties or the entities as the amendments assist entities to obtain
support from the public and allow parties that provide gifts to obtain an income
tax deduction if eligibility requirements are met. The removal of deductible
gift recipient status for the Mt Eliza Graduate School of Business and
Government Limited applies prospectively.
Financial Impact
The former and current Governments had separately announced
the listing requests by the entities in Schedule 1 to the Bill in the following
budget papers. The relevant financial impacts according to the Explanatory
Memorandum (pp. 2–3) are also provided below.
1. Mid-Year
Economic and Fiscal Outlook 2021–22 (p. 185)
- Jewish Education Foundation (Vic) Ltd
- Australian Education Research Organisation
Financial impact: The listing of the above two
entities was ‘estimated
to have a negligible cost from 2022–23 to 2025–26’, (p. 2).
2. Budget
Measures: Budget Paper No.2: March 2022-23 (p. 25)
- Melbourne
Business School
- Leaders
Institute of South Australia
- St
Patrick’s Cathedral Melbourne Restoration Fund
- Sydney
Chevra Kadisha
- Mt
Eliza Graduate School of Business and Government Limited
Financial impact: The listing of the above entities
was ‘estimated
to decrease receipts by $6.3 million from 2023–24 to 2025–26’, (p. 2).
All figures in this table represent amounts in $m.[9]
| 2022-23 |
2023-24 |
2024-25 |
2025-26 |
| - |
-2.9 |
-2.5 |
-0.9 |
Source: Explanatory Memorandum, 2.
3. Budget
Measures: Budget Paper No.2: October 2022-23 (p. 17)
- Australians
for Indigenous Constitutional Recognition Ltd
- Australian
Women Donors Network (now, Australians Investing in Women).
Financial impact: The listing of the above entities
was ‘estimated
to decrease receipts by $0.8 million from 2023–24 to 2025–26’, (p. 3).
All figures in this table represent amounts in $m.[10]
| 2022-23 |
2023-24 |
2024-25 |
2025-26 |
| - |
-0.2 |
-0.3 |
-0.3 |
Source: Explanatory Memorandum, 2–3.