With the ushering in of the new year, deductible gift recipient (DGR) reforms are now in place. The reforms were originally announced by the previous government in 2017 with legislation finally becoming law in June 2023. From 1 January 2024, the administration of 4 unique DGR categories will transfer to the ATO from other government departments. These 4 categories consist of environmental organisations, harm prevention charities, cultural organisations, and overseas aid organisations.

Prior to 1 January 2024, each of the 4 unique DGR categories were administered by a different government department. A register of cultural organisations was administered by the Department of Infrastructure, Transport, Regional Development, Communications and Arts. A register of environmental organisations was administered by the Department of Climate Change, Energy, the Environment and Water. A register of Harm Prevention Charities was administered by the Department of Social Services, and the overseas aid gift deductibility scheme was administered by the Department of Foreign Affairs and Trade.

The changes will mean that the departments that previously administered the unique DGR categories no longer have to maintain a separate register. In addition, as the ATO had already administered 48 out of the 52 DGR general categories, the changes will mean that all DGR categories will now be under the remit of the ATO. This will ensure consistency of administration, reduce red tape, and simplify the application process for organisations seeking DGR status.

These changes affect both DGRs already endorsed in one of the 4 unique categories and those that had an application in progress with one of the 4 government departments and had not been notified of an outcome of their request by 31 December 2023. Applications that did not have an outcome determined would be automatically transferred to the ATO from 1 January 2024. In general, notwithstanding the changes, organisations that continue to meet eligibility criteria will continue to remain endorsed.

Associated with these changes and in order to maintain the integrity of the DGR sector broadly, the ATO has also commenced a compliance review of the DGR status of some 234 organisations listed in the tax law. The reviews will largely focus on proof of activity, purpose and use of donations. It will initially prioritise listed DGR organisations that are not registered with the ACNC and ACNC registered charities that have not reported donations. This will be followed by the remaining DGR population.

In addition to these changes, 2024 could also see the establishment of a new class of DGRs for community foundations. A measure to list up to 28 specific community foundations affiliated with Community Foundations Australia (CFAustralia) was originally announced by the previous government. The current government then proposed amendments to the measure in the 2023-24 Budget papers with legislation currently before the Senate.

According to the government the changes were required due to community charities and trusts not fitting neatly into any one existing DGR category, thus increasing integrity risks. Therefore, the creation of a hybrid framework for DGR endorsement for community charities was seen as the best way forward. The legislation would insert listing of items in respect of communities’ charities and trusts, although the listing itself does not confer DGR status. Instead,  the listing allows entities in the specified class to apply for DGR endorsement subject to certain conditions.

2024 looks set to be the year of change for the DGR sector, with major reforms to the sector as well as the release of refreshed guidance, both transitional and ongoing, by the ATO on the eligibility requirements for the 4 unique DGR categories.