LSB December 2021 HR

TAX FILES
DGRs that are not already charities
PAUL INGRAM, SENIOR LEGAL COUNSEL, MINTERELLISON
Most of the general Deductible Gift
Recipient (DGR) categories in
Division 30 of the ITAA 1997 require the
relevant fund, authority or institution to be:
• a Registered Charity (ie. with the
ACNC);
• an ‘Australian Government Agency’; or
• operated by a Registered Charity or
Australian Government Agency
before they can apply for endorsement as
a DGR.
But there were 11 general DGR
categories that were not subject to this
requirement, namely:
• public funds for hospitals (item 1.1.3);
• public funds for public ambulance
services (item 1.1.8);
• public funds for religious instruction in
government schools (item 2.1.8);
• Roman Catholic public funds for
religious instruction in government
schools (item 2.1.9);
• school building funds (item 2.1.10);
• public funds for rural school hostel
buildings (item 2.1.11);
• approved research institutes (item 3.1.1);
• necessitous circumstances funds (item
4.1.3);
• REO funds – ie. public funds on
the Register of Environmental
Organisations (item 6.1.1);
• ROCO funds – ie. public funds on
the Register of Cultural Organisations
(item 12.1.1); and
• fire and emergency services funds
(item 12A.1.3).
However, as a result of the Treasury
Laws Amendment (2021 Measures No. 2) Act
2021 (Amending Act), which received
Assent on 13 September 2021, these 11
categories will now also be subject to the
same requirement.
The change takes effect from 13
December 2021, being 3 months after
the date of Assent, but is subject to some
important transitional measures (explained
below).
AUTOMATIC 12-MONTH GENERAL
TRANSITION PERIOD FOR EXISTING DGRS
All existing non-government DGRs
will have 12 months (ie. until 13 December
2022) to become a Registered Charity.
34 THE BULLETIN December 2021
This will give affected DGRs time to:
• review their Constitutions, and their
entitlement to charity status generally;
• effect any required changes; and
• apply to the ACNC for registration.
Affected DGRs who do not comply
with the new requirement will lose
their DGR status as at 13 December
2022, unless they have obtained an
‘extended application date’ under the next
transitional measure.
DISCRETION TO GRANT A THREE-YEAR
EXTENSION
Affected DGRs can also apply to have
an ‘extended application date’ (being 13
December 2025).
Applications for this measure have
to be made by 13 December 2022, and
will be granted at the Commissioner’s
discretion. Before that discretion can be
exercised:
• the Commissioner must be satisfied
that the following ‘prescribed’ criteria
are met:
◦ there has been no change in the
applicant’s circumstances that
would affect its entitlement to
DGR endorsement (but for these
amendments);
◦ the applicant has never had an
application for registration under
the ACNC legislation refused; and
◦ the applicant has never had its
registration under the ACNC
legislation involuntarily revoked;
and
• the Commissioner must also have
regard to certain ‘prescribed matters’,
namely:
◦ whether the applicant has taken
steps to satisfy the requirements
for registration as a charity, to apply
for registration, and to provide all
required information;
◦ whether it is reasonably possible
that the applicant will be able to
satisfy the requirements for charity
registration by 13 December 2025;
◦ if the applicant believes that it is
unlikely to satisfy the requirements
for charity registration by 13
December 2025 – whether it is
reasonable for the applicant to be
given additional time to wind up
and distribute surplus assets; and
◦ any views expressed by the ACNC
Commissioner about the above
matters.
OUTSTANDING DGR APPLICATIONS AS AT
13 DECEMBER 2021
Where an organisation has made an
application to the Commissioner for
endorsement under one of the affected
DGR categories prior to 13 December
2021, and the application has not been
determined by that date, that organisation
will qualify for both the 12 month general
transition period and the three year
extended transition period.
However, it appears that REO and
ROCO applications are a special case:
• these applications involve a two-step
procedure:
◦ approval by the relevant Minister;
and
◦ endorsement by the Commissioner;
• the ATO position appears to be that
if the first of those steps (Ministerial
approval) has not been satisfied by 13
December 2021, then the applicant will
not be entitled to any transitional relief
(and will presumably have to apply for
Charity Registration before the REO/
ROCCO application will progress);
• however, if the first step (Ministerial
approval) has been satisfied by 13
December 2021, but the application
for endorsement has not been
determined by the Commissioner
by that date, then both transitional
measures will presumably apply.
APPLICATIONS MADE AFTER 13 DECEMBER
2021
Organisations applying under one
of the affected DGR categories after
13 December 2021 will need to comply
with the new requirement before their
application can proceed.
Tax Files is contributed by members
of the Taxation Committee of the
Business Law Section of the Law Council
of South Australia. B