Treasury consults on Community Foundations reforms 

Submissions due on 16 July on changes that could provide DGR 1 status to 28 Community Foundations 

Treasury is consulting on reforms to Community Foundations that look set to not only give effect to the Government’s commitment to provide DGR 1 status to 28 Community Foundations, but to also provide a more streamlined process for new Community Foundations to access DGR 1 status in the future. 

On 28 June, Treasury released Building Community – deductible gift recipient status for community foundations which involves consulting on the Treasury Laws Amendment (Measures for Consultation) Bill 2023.  Within months, Treasury will also consult on the guidelines currently being drafted that will apply to Community Foundations that have been granted DGR 1 status. 

The time provided for consultation is short, with submissions due on 16 July. Philanthropy Australia is engaging with Community Foundations Australia and Herbert Smith Freehills to assess the material and will provide a submission. We collectively met with Treasury staff on 30 June to better understand their approach.   

We understand the intention is that, to gain DGR 1 status, Community Foundations will need to pass two hurdles: 

1. The Minister for Charities will have the power to prescribe entities using a delegated instrument. We anticipate this will be an easier process than listing in the Tax Act, which requires legislation to be passed in the Parliament.   

2. The ATO would assess an application by the entity. Where the entity met a range of requirements – for instance, is a registered charity, has appropriate governing documents, meets the definition of a Community Foundation and is consistent with the Ministerial guidelines, the entity would be entitled to DGR 1 status. 

Importantly, Community Foundations would be able to receive funds from Private Ancillary Funds. 

Community Foundations would be able to distribute to community organisations that do not have DGR 1 status, but are undertaking charitable activities (that fall within the 52 endorsement categories). 

In sum, the proposed reforms look positive, subject to two caveats:   

• The Exposure Draft and explanatory materials are written in a complex manner.  The main thrust of PA’s submission will be to ensure the proposed intent – detailed above – is more clearly captured. 
• Reform is not done until the legislation is passed and the guidelines are finalised. 

We will continue to engage closely on this policy reform until a strong reform outcome is delivered.