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New deductible gift category opens opportunity for community shed organisations

28 August 2020
craig gibson hannah fraenkel
Read Time 3 mins reading time

Charities that run premises aimed at advancing mental health and preventing social isolation (known as “community sheds”) now have better access to tax deductibility status for gifts following recent changes to federal rules.

The availability of deductible gift recipient (DGR) endorsement for community sheds became more easily available with the introduction of a new DGR category in the Treasury Laws Amendment (2020 Measures No.2) Bill 2020 that was passed on Tuesday by the Commonwealth Parliament.

DGR endorsement is a highly sought after status for charities (and other organisations), allowing the organisation to provide its donor’s income tax deductions on a range of monetary and non-monetary gifts.

There are currently over 1,000 community sheds for men in Australia and around 20 community sheds for women, many of which have previously been unable to receive endorsement as a DGR under existing categories.

The extension of the DGR categories to include community sheds is therefore a welcome development, and will likely lead to an expansion in the number of sheds across Australia (including consideration around the restructuring of many religious and other community group premises in a way that may entitlement them to endorsement under the new category).

Like most existing DGR categories, however, eligibility for endorsement is subject to strict (and somewhat narrow) criteria that require the organisation:

  • to be registered as a charity with the Australian Charities and Not-for-Profits Commission (ACNC);
  • meet the legal description of a ‘public institution’;
  • have a dominant purpose of advancing mental health and preventing or relieving social isolation;
  • operate a physical location at which its purposes are principally advanced, by providing individuals support at a location where they work on projects or undertake other activities in the company of others; and
  • have open membership to the public, save for two permitted restrictions limiting membership to any particular gender or limiting membership to persons of Indigenous heritage.

While a number of the above requirements will differentiate community sheds eligible for endorsement under the new DGR category from other community organisations that may have similar purposes or activities, a key distinction will be that having a physical location at which individuals meet (which need not be fixed or permanent) is not alone sufficient without the organisation actively supporting or encouraging the use of the location in the advancement of mental health and relief of social isolation.

Some of the ways this support or encouragement could be demonstrated is through the provision of information and other resources to members at the location to inform their understanding of mental health issues, or organising projects or other activities at the location that foster supportive peer relationships for people at risk of social isolation.

Organisations interested in considering their eligibility for endorsement under the new community shed DGR category should first review their governing document to ensure it meets the criteria for both registration as a charity and endorsement the new DGR category.

Should your organisation wish to find out if it will be eligible for endorsement under this new DGR category, please contact Craig Gibson and Hannah Fraenkel– our specialist charity and not-for-profit lawyers from Macpherson Kelley’s tax team.

Hannah joined Macpherson Kelley last year from the ACNC where she provided advice to Treasury on the definition of ‘community sheds’ for charity registration purposes, and in the framing of this new category.

Hannah can help community organisations navigate this new definition and DGR category and hopefully achieve the DGR endorsement for their ‘community shed’.

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New deductible gift category opens opportunity for community shed organisations

28 August 2020
craig gibson hannah fraenkel

Charities that run premises aimed at advancing mental health and preventing social isolation (known as “community sheds”) now have better access to tax deductibility status for gifts following recent changes to federal rules.

The availability of deductible gift recipient (DGR) endorsement for community sheds became more easily available with the introduction of a new DGR category in the Treasury Laws Amendment (2020 Measures No.2) Bill 2020 that was passed on Tuesday by the Commonwealth Parliament.

DGR endorsement is a highly sought after status for charities (and other organisations), allowing the organisation to provide its donor’s income tax deductions on a range of monetary and non-monetary gifts.

There are currently over 1,000 community sheds for men in Australia and around 20 community sheds for women, many of which have previously been unable to receive endorsement as a DGR under existing categories.

The extension of the DGR categories to include community sheds is therefore a welcome development, and will likely lead to an expansion in the number of sheds across Australia (including consideration around the restructuring of many religious and other community group premises in a way that may entitlement them to endorsement under the new category).

Like most existing DGR categories, however, eligibility for endorsement is subject to strict (and somewhat narrow) criteria that require the organisation:

  • to be registered as a charity with the Australian Charities and Not-for-Profits Commission (ACNC);
  • meet the legal description of a ‘public institution’;
  • have a dominant purpose of advancing mental health and preventing or relieving social isolation;
  • operate a physical location at which its purposes are principally advanced, by providing individuals support at a location where they work on projects or undertake other activities in the company of others; and
  • have open membership to the public, save for two permitted restrictions limiting membership to any particular gender or limiting membership to persons of Indigenous heritage.

While a number of the above requirements will differentiate community sheds eligible for endorsement under the new DGR category from other community organisations that may have similar purposes or activities, a key distinction will be that having a physical location at which individuals meet (which need not be fixed or permanent) is not alone sufficient without the organisation actively supporting or encouraging the use of the location in the advancement of mental health and relief of social isolation.

Some of the ways this support or encouragement could be demonstrated is through the provision of information and other resources to members at the location to inform their understanding of mental health issues, or organising projects or other activities at the location that foster supportive peer relationships for people at risk of social isolation.

Organisations interested in considering their eligibility for endorsement under the new community shed DGR category should first review their governing document to ensure it meets the criteria for both registration as a charity and endorsement the new DGR category.

Should your organisation wish to find out if it will be eligible for endorsement under this new DGR category, please contact Craig Gibson and Hannah Fraenkel– our specialist charity and not-for-profit lawyers from Macpherson Kelley’s tax team.

Hannah joined Macpherson Kelley last year from the ACNC where she provided advice to Treasury on the definition of ‘community sheds’ for charity registration purposes, and in the framing of this new category.

Hannah can help community organisations navigate this new definition and DGR category and hopefully achieve the DGR endorsement for their ‘community shed’.