Deductible Gift Recipient (DGR) endorsement under Subdivision 30-A ITAA 1997

Legal framework for DGR endorsement

Subdivision 30-A of the Income Tax Assessment Act 1997 establishes the rules for when gifts to a Deductible Gift Recipient (DGR) are tax deductible for the donor. The table in section 30-15 of the Act defines the categories of gift recipients eligible for DGR endorsement. These categories include general fund/institution categories (Item 1), private ancillary funds (Item 2) and public ancillary funds (Item 4).

The ATO administers around 53 general DGR categories, which include Public Benevolent Institutions (PBIs), Health Promotion Charities (HPCs), public hospitals, public libraries and overseas aid funds. ACNC governance standards for charities are relevant considerations for organisations seeking endorsement.

Recent reforms, effective from 1 January 2024, mandate that almost all non-government DGRs be registered charities with the Australian Charities and Not-for-profits Commission (ACNC). The ATO grants DGR endorsement, while the ACNC handles charity registration and assesses certain sub-types, such as PBIs and HPCs.

Whole-of-entity vs single-fund endorsement

An entity can be endorsed as a Deductible Gift Recipient (DGR) in its own right, referred to as whole-of-entity endorsement, if it meets the requirements of one of the DGR general categories, such as a Public Benevolent Institution (PBI) or Health Promotion Charity (HPC). Alternatively, an entity may be endorsed only for the operation of a fund, authority or institution it owns or controls.

If an entity is endorsed only for a single fund, it is required to maintain a separate gift fund. This fund must accurately record all deductible gifts, contributions, and any associated earnings. This separation ensures accountability and transparency in the handling of donations. ACNC reporting obligations apply to all DGRs.

Upon the winding up of either the entity or the DGR fund itself, any surplus gifts and deductible contributions must be transferred to another endorsed DGR. Importantly, all DGR endorsements are granted in writing by the ATO, and donors cannot rely on self-assessment to determine deductibility.

Public benevolent institution test for Item 1

An entity seeking DGR endorsement as a public benevolent institution (PBI) under Item 1 of section 30-15 ITAA 1997 (table item 1.1.1) must satisfy a specific test. This test requires the entity to be established for the relief of poverty, sickness, suffering, distress, misfortune, disability or helplessness. Entities should also be aware of ACNC governance standards for charities when considering this status.

Following the Federal Court’s *Hunger Project* decision, a PBI does not necessarily need to provide benevolent relief directly. Fundraising activities for affiliated entities can be considered to meet the PBI test requirements.

To obtain PBI status, an entity first applies to the Australian Charities and Not-for-profits Commission (ACNC) for that sub-type. Separate endorsement as a DGR is then sought from the Australian Taxation Office. PBI status also provides access to an FBT exemption, subject to a grossed-up cap of $30,000 per employee for the 2026 FBT year.

Ongoing DGR obligations and record-keeping

Following endorsement, DGRs have ongoing obligations to maintain compliance. These include issuing receipts for deductible gifts. Receipts must clearly state the DGR’s name and ABN, the date and amount of the gift, and a statement confirming its tax-deductible nature.

DGRs are required to maintain detailed records. These records must substantiate all deductible gifts and contributions received and must be retained for a minimum of five years from the date they were prepared or the transactions completed. Most general DGR categories now require ACNC reporting obligations and failure to maintain ACNC registration will end DGR entitlement.

If a DGR ceases to be entitled to endorsement, notification to the ATO must occur within 21 days. The ATO Tax Office retains the power to revoke DGR endorsement retrospectively, which can result in the entity incurring tax liabilities on gifts received after the date of revocation.