Charities win some, lose some with new DGR reforms

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The government’s announcement this week that it will be introducing reforms in relation to deductible gift recipients (DGRs) has come as a relief to many charities but is causing concern for others in relation to its proposed restrictions on political advocacy.

DGRs to become charities

The government has proposed to register all non-government DGRs as charities with the ACNC from 1 July 2019.

There are currently four DGR registers, each administered by different Departments, but the government plans to merge these with the ACNC register. This means that DGRs will no longer have duplicated reporting requirements and will report only to the ACNC (including by submitting Annual Information Statements).

The ACNC and ATO will receive increased funding to review the ongoing eligibility of charities to DGR status.

“In Australia” requirements abandoned

The government has ended long standing uncertainty surrounding its proposal to introduce an “in Australia” requirement for DGRs, which would have required DGRs to operate and pursue their purposes principally in Australia. This announcement means that Australian donors can continue to receive tax deductions in support of charitable causes overseas.

However, under the proposed reforms DGRs who send funds or engage in activities outside of Australia may need to comply with a set of “external conduct standards” to address the risk of money laundering and terrorism financing. These standards are yet to be developed.

Environmental advocacy permitted

Importantly for environmental organisations with DGR status, the government has announced that it will not proceed with the proposed requirement for environmental organisations to spend at least 25% (and potentially up to 50%) of their resources on remediation activities. The change in position comes only a few weeks after BHP told environmental groups that it did not support the proposal, as environmental organisations make important contributions to policy development in a democratic society.

Political advocacy

The new reforms, however, will introduce additional monitoring of charities that engage in political advocacy. These appear to be directed at advocacy groups such as Get Up, but other charities that spend money for a “political purpose” (including publicly expressing views on a politician or party, or an issue in an election) may find themselves caught by the new laws.

Charities that spent more than $100,000 on political advocacy in any one of the previous four years (or $50,000 if that represents more than half of their annual budget) will soon:

  • be required to comply with the same transparency, disclosure and reporting requirements that apply to political parties; and
  • be banned from receiving international donations.

The reforms would require the ACNC to disclose to the Australian Electoral Commission charities’ declared political expenditure.

The new Bill is yet to be introduced but the government has said it intends to consult with the sector before finalising the legislation.