If you are an NFP organisation that does not have DGR – Deductible Gift Recipient – status, it means that, while anyone can give your organisation a donation, your organisation cannot issue a tax receipt, therefore the donor cannot claim a tax deduction for the donation. There are several reasons why you want to have DGR status and a few things to consider about what’s involved. Here we set out some of these considerations and address some of the elephants in the room about giving and receiving donations.
Reasons you could consider DGR for your organisation
- You have just started your organisation and want to start raising funds
- You have been operating for a while and income has started to decline
- You’ve heard you could raise more money from trusts and foundations with DGR status
- Government funding has stopped or reduced and you need to find replacement funding
- You think you’d attract more individual donors by having DGR status
All these reasons centre around the idea that gaining DGR status will help you raise more money for your organisation. This is likely true if you also follow a few guidelines and dispel the following myths.
Myth 1: Gaining DGR status is a strategy to make more money
It is true that gaining DGR status can make your organisation more attractive to donors, however, who are these potential donors? Consideration to apply for DGR endorsement should be a part of a strategic plan, which includes a fundraising plan. DGR endorsement is therefore a part of this plan. In order to capitalise on DGR status, you need to have identified prospective donors and how you will engage with them once you have DGR status. Perhaps you will have already developed relationships that will flourish once you have DGR status in place. Therefore, gaining DGR status is a tactic in your fundraising plan, not a strategy in itself – on its own, it won’t raise more money.
Myth 2: DGR status is just about raising more money
There are implications when you secure DGR endorsement. Some of these implications relate to how your assets would need to be distributed should you wind up the organisation. Others relate to reporting and the setting up of a gift fund; for this, you need expert advice. You can visit the Australian Tax Office (ATO) website and the Australian Charities & Not-for-profits Commission (ACNC) for more information on the requirements of gaining DGR status.
Myth 3: The board members give their time and don’t need to give money
You may think it strange that this point is included here, but. as part of your fundraising plan to raise more money, it is essential and mandatory that each of your board or main committee members donate. Your board leads the way – if you want to raise more money, with or without DGR status, your board needs to show leadership with whatever gift is significant for each of them individually. Why should others give if your board does not?
Myth 4: You can’t raise funds without DGR status
There are some revenue generating activities that do not require DGR status. Two, in particular, are bequests and corporate sponsorship. Bequests are gifts provided to an organisation in a donor’s will and left to the organisation after the donor’s death, therefore tax deductibility (DGR) is not an issue. Corporate sponsorship or corporate donations can potentially be claimed by a business as a marketing expense and, therefore, do not require DGR status.
Membership fees, fees for services, sales of goods including ticket sales, merchandise, raffles and lotteries, certain events do not require tax deductibility.
As part of your fundraising plan, consider the age of your donors – retirement and tax deductibility (which is relevant if you have taxable income) may not be so important.
Local government grants and some trusts and foundations often provide smaller grants, and these entities do not always require tax deductibility as these grants can be specially designed for smaller organisations.
These activities, and others, could be built into a fundraising plan to help generate income for the future while you consider the benefits and requirements of gaining DGR status.
Myth 5: Fundraising is the responsibility of the fundraising department/company secretary (i.e. someone else)
If you want to raise more money, with or without DGR status, fundraising becomes everyone’s responsibility. This means each person on the board – and, for larger organisations, the senior leadership team – has a responsibility to assist in growing the philanthropic culture of the organisation and helping to generate support and income for the organisation’s priorities. Which leads us to the plan which will articulate individual tasks, roles, and responsibilities to raise funds.
Myth 6: We don’t need a plan – we know what we’re doing
If you want to raise money for anything – a new building, a new basketball court, a new drama production – you need a written, specific plan. The benefits of a plan are many but here are a few.
If you have a written plan, you can:
- Share it with others
- Allocate tasks to individuals
- Set measurable goals and strategies
- Measure your success
- Adjust your plan as you gain more experience and knowledge
Gaining DGR status may be a major part of your plan. If it’s written down, you can clearly allocate the task to someone and measure how its progressing. A written plan will out- perform a mental (or non-existent) plan any day of the week.
Fundraising success – with or without DGR
DGR status can be beneficial to not-for-profit organisations seeking to grow or diversify their funding particularly from individual donors as well as trusts and foundations. There are legal and technical implications of being endorsed for DGR and organisational leadership should seek professional advice. Regardless, having a fundraising strategy to clearly identify how you will raise funds with or without DGR will take you a long way towards achieving your goals. Engage with your board and leadership team and encourage them to show leadership. With these tools, you will start the journey to developing a culture of philanthropy in your organisation and help structure yourselves for fundraising success.
AskRIGHT cannot provide legal or financial advice. All information provided is of a general nature and you may wish to seek specific legal or financial advice to address your particular circumstances.
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