New Paper Details Potential Reforms to DGR Status

The not-for-profit sector is being called on to have its say over a new discussion paper exploring potential reforms to the Deductible Gift Recipient (DGR) tax arrangements for charities.

The Tax Deductible Gift Recipient Reform Opportunities paper, which was published by the treasury on Thursday, examines the governance of DGRs and the complexity of DGR application processes.

Included in a number of reforms the paper recommends an increased role for the Australian Charities and Not-for-profits Commission whereby all DGRs could be required to be charities registered and regulated by the ACNC.

In a bid to simplify the application process it also recommends removing public fund requirements and transferring the administration of the four DGR registers to the ATO.

However concerns have been raised over a number of inclusions that focus on charities engagement in advocacy activities.

One of the consultation questions asked is: “Should the ACNC require additional information from all charities about their advocacy activities?”

Sarah Davies, CEO of Philanthropy Australia told Pro Bono News a review of the system was welcome, but there were some “concerning proposals”.

“It’s essential that our DGR framework works effectively, so we can grow philanthropy and its impact in the community. We need a contemporary and relevant DGR framework that enables and encourages giving and community investment for maximum societal benefit,” Davies said.

“So reviews and checks of the system against what’s needed are welcome. The discussion paper released by the Australian government posits a range of ideas and suggestions: some sensible reform ideas, but also some very concerning proposals.

“Of significant concern are the suggested new restrictions and unnecessary reporting burdens which seek to stifle or limit advocacy activities by charities.”

Davies said Philanthropy Australia would be making a full submission in response to the paper and would “work closely with colleagues to strongly oppose such limitations and restrictions”.

“It’s vital that we all participate in the consultation process to ensure that our views are heard and that the final outcome is good for philanthropy, good for charities and good for the community,” she said.

The paper builds on the inquiry into the Register of Environmental Organisations (REO) which was tabled by House of Representatives Standing Committee on the Environment in May 2016.

According to the report the aim is “to strengthen the DGR governance arrangements, reduce administrative complexity and ensure that an organisation’s eligibility for DGR status is up to date”.

Among the issues raised by the paper, it said there were concerns that the application process for obtaining DGR status was too complex.

It also said there were “concerns that some charities and DGRs undertake advocacy activity that may be out of step with the expectations of the broader community, particularly by environmental DGRs which must have a principal purpose of protecting the environment”.

It called for stakeholders’ views “on requiring environmental organisations to commit no less than 25 per cent of their annual expenditure from their public fund to environmental remediation, and whether a higher limit, such as 50 per cent, should be considered.”

Community Council Australia CEO David Crosbie told Pro Bono News the not-for-profit sector should take an active role in reviewing the proposals.

“This treasury discussion paper has been rumoured for some time. It builds on some of the recommendations from the inquiry into tax deductibility and environmental organisations,” Crosbie said.

“It is very important for the charities and not-for-profit sector to take a very active role in reviewing not just how DGR is granted, but all the proposed new monitoring processes.  

“CCA has long argued that the ACNC should play a more significant role in DGR, that the current DGR approval processes are a mess, and that all registered charities should be eligible for DGR.

“CCA will be preparing a strong submission in response to this discussion paper and welcomes all feedback.”

ACNC assistant commissioner Murray Baird told Pro Bono News the paper gave stakeholders an opportunity to comment on the proposed reforms.

“There will be members of the sector or organisations in the sector who will no doubt want to make submissions to the treasury paper,” Baird said.

“Quite a few of the proposals set out in the paper, arise from the parliamentary enquiry into the register of environmental organisations, and in that enquiry the ACNC expressed support for the consolidation of the DGR registers in one place, and support for the proposal that the ATO and the ACNC could work together to streamline charity registrations and DGR registrations.”

Closing date for submissions is Friday 14 July 2017.