Changes to the administrative arrangements of certain DGRs coming in 2024
On 28 June 2023 the Treasury Laws Amendment (Refining and Improving our Tax System) Bill 2023 received royal assent. This means that, from 1 January 2024, the Register of Environmental Organisations (REO), Register of Harm Prevention Charities (ROHPC), Register of Cultural Organisations (ROCO) (collectively, the Registers) and the Overseas Aid Gift Deduction Scheme (OAGDS) will be administered by the ATO.
Existing DGRs on the Registers
Importantly, current DGRs will continue to be endorsed so long as they meet the existing eligibility criteria. Internal administration and reporting obligations for existing DGRs on the Registers will be simplified, so now is a good time to review your constitution or rules so you can take advantage of these changes!
Public fund requirements
Charities with a fund listed on one of the Registers will no longer need to maintain a public fund. Instead, they will need to maintain a gift fund. A gift fund is similar to a public fund in that it is a fund maintained and used only for the specified principal purpose. All gifts and deductible contributions of money or property for that purpose are made to the fund, and any money received by the organisation, because of such gifts or deductible contributions are credited to it. The fund cannot receive any other money or property.
Unlike a public fund, a gift fund does not need to be overseen by a Public Fund Management Committee comprising a majority of persons who, because of their tenure of some public office or their position in the community, have a degree of responsibility to the community as a whole. Instead, your organisation’s governing body (e.g. its board or committee) will be able to manage the gift fund, significantly reducing your internal administrative burden.
The other key difference is that you do not need a separate bank account for the operation of a gift fund. However, banking money in a separate account does provide clear evidence of the existence of a gift fund so your organisation may choose to maintain the separate account.
Organisations can voluntarily continue with the more restrictive obligations associated with a public fund if they wish to do so.
Reporting requirements
There will no longer be a requirement for your organisation to provide statistical information about gifts made during an income year as the Registers will no longer be maintained by the Government Department. The ACNC and ATO will receive the necessary information via the Annual Information Statement and general charity registration.
Winding up provisions
Organisations with funds listed on the REO and ROHPC will no longer be required to transfer any surplus asset on winding up or revocation of their DGR endorsement to another fund listed on the REO or ROHPC (as applicable). Rather, surplus assets can be transferred to another DGR with similar charitable purposes, which is the case currently for other DGRs (including those listed on the ROCO).
Organisations can choose to have a more limiting winding up provision that require surplus assets to be transferred to a specific DGR or specific kind of DGR.
Current applications or applications submitted before 1 January 2024 to the Registers
Transitional provisions apply to ensure that the ATO can assess applications currently under consideration for entry onto a register for endorsement as a DGR.
What this means in practice is that if you have not been advised of the outcome of your application before 1 January 2024, this is likely to happen shortly thereafter as the ATO will be administering these DGRs, which means applications will no longer go through the lengthy process of Ministerial approval. This will reduce a one to two year timeframe to around one month!
Changes to the OAGDS
The DGR scheme relating to overseas aid gift funds has the most significant changes from the previous legislative scheme.
There is no register associated with the OAGDS. To facilitate the administrative change to the OAGDS, the test for eligibility has shifted from a test of capacity (assessed by DFAT) to a test of principal purpose (assessed by the ATO), given the different functions and capabilities of each agency.
Specifically, under the old regime, organisations needed to be assessed by DFAT as satisfying certain criteria to become an ‘approved organisation’. Under the new requirements, overseas aid organisations eligible for endorsement as DGRs must have a principal purpose, or operate a public fund with the principal purpose, of delivering development or humanitarian assistance activities (or both) in developing countries.[1] These activities must be delivered in partnership with entities in the country, based on principles of cooperation, mutual respect and shared accountability. This is an assessment that will now be undertaken by the ATO.
All existing DGRs under the overseas aid category will be deemed to meet the new requirements until their principal purpose changes.
This publication was authored by Hannah Rose and is ©For Purpose Advisory. It is for general guidance only and any opinions expressed are the opinions of the author. The content and any links are current as at the date it was published and For Purpose Advisory takes no responsibility for any changes to the links or accuracy of the content. Legal advice should be sought before taking action in relation to any specific issues mentioned in this publication.
[1] The meaning of developing country for the principal purpose test will mean inclusion in the list of official development assistance recipients published from time to time by the OECD’s Development Assistance Committee, or as declared by the Foreign Affairs Minister. Countries currently specified to be a developing country under a declaration by the Foreign Affairs Minister will be treated as developing countries until the Foreign Affairs Minister makes a new legislative instrument declaring countries to be a developing country.
