The ACNC is reviewing Deductible Gift Recipients – are you ready?

Commencing 1 July 2020, the ACNC will review selected charities’ eligibility for Deductible Gift Recipient (DGR) endorsement and charity registration. These reviews are part of DGR reforms announced in 2017, most of which have not yet been implemented. The purpose of the reviews is to ascertain whether charities remain entitled to registration as a charity. If a charity is not meeting its obligations, the ACNC may take action in accordance with its regulatory approach. In very serious cases, this can include loss of charity registration.

Who is being reviewed?

The ACNC has said it proposes to review approximately 500 charities per year, starting with Public Benevolent Institutions (PBIs). PBIs are charities that provide relief to people in need and include hospitals, welfare services, legal services and charities working with marginalised and disadvantaged communities.

PBIs will be prioritised for review if they:

  • do not have a governing document uploaded to the ACNC Charity Register;
  • have one or no Responsible Persons listed on the ACNC Charity Register;
  • received endorsement as a PBI before the establishment of the ACNC (3 December 2012); and
  • are not ORIC regulated entities (i.e Indigenous Corporations).

The ACNC will also continue their usual practice of reviewing PBI eligibility for charities in response to concerns raised by third parties including the public, employees, beneficiaries, other regulators or the media.

How will the reviews be conducted?

The ACNC has not provided details of how the assessment will be carried out, other than to note that:

  • reviews will commence using publicly available information;
  • charities will not be notified that they are under review unless there is a problem; and
  • charities should self-assess against the Charity Registration Self-Assessment Tool.

How your PBI can prepare

Understand your obligations

DGR charities are required to comply with the ACNC Governance Standards and ACNC External Conduct Standards (if they have overseas operations). They must also meet the eligibility requirements for their particular DGR category. In the case of PBIs, the ACNC has released a Commissioner’s Interpretation Statement on Public Benevolent Institutions setting out the ACNC’s interpretation of the law that applies to PBIs. Although the Commissioner’s Interpretation Statement is fairly technical, it provides context and background to the questions in the self-assessment tool.

Many charities were automatically transferred to the ACNC Charity Register when the ACNC was established in late 2012. These charities have most likely never been assessed for compliance by the ACNC. It is important that these charities in particular take the time to review and understand their obligations, as they will be prioritised for review. 

Involve your Responsible Persons

Your charity’s Responsible Persons (the board, committee or trustees, depending on your structure) are responsible for compliance with the Governance Standards and External Conduct Standards. This is a governance issue, not an operational issue. The charity self-assessment should be carried out or at least overseen by your Responsible Persons.

Some key issues to consider

The public guidance the ACNC has released and our experience registering new PBIs suggests that the review may look at matters including:

  • Whether your charity’s stated purpose in your governing document is appropriate for a PBI. Does your purpose involve providing benevolent relief to people in need?
  • Are your charity’s activities directed towards its purpose?
  • Who does your charity assist? Do they have a need that “arouses community compassion”?
  • How does your charity assist those individuals? Are your activities directed towards relieving that need?
  • If you have activities that do not involve providing benevolent relief to people in need, are they merely incidental or minor compared to your benevolent activities?
  • Does your organisation have a religious motive (which is permissible) or does it have a religious purpose (which is not permissible under the Commissioner’s Interpretation Statement). This is not an easy distinction to make!

What if my charity is not a PBI?

All charities should regularly self-assess to ensure that they are complying with their obligations. Good governance is a requirement of your ongoing entitlement to charity registration. DGRs in particular should be aware that the ACNC is likely to assess additional DGR categories when the PBI assessments are complete.

Next steps

If you have concerns about your charity’s eligibility, our expert For Purpose team at Moores can assist with your queries. Please do not hesitate to contact us.