Question
We are a not-for-profit local historical society and the challenge of sourcing funding is never ending.
Is it possible for us to secure Deductible Gift Recipient (DGR) status and, if so, how can that be done and what issues arise?
Answer
It may indeed be possible for your organisation to secure Deductible Gift Recipient (DGR) status.
The obvious benefit of securing DGR status (amongst many others) is that members of the public may donate monies to your organisation for which the person will be entitled to a tax deduction.
Your question doesn’t provide specific information about your organisation so the response below provides some general commentary about how it may be possible to secure DGR status.
The usual legal form of a local historical society is that of an incorporated association with a constitution that confirms the organisation is not carried on for the profit of members and, on winding up, surplus assets remaining after payment of the organisation’s debt must be given to a like purpose organisation. A local historical society of this type is likely to already be registered as a charity (under the sub-type of advancing culture) with the Australian Charities and Not-for-profits Commission.
Whilst the objects of each organisation will vary, generally objects such as the following will be included in the constitution of a local historical society:
- to develop the community’s interest in the history of a local area;
- to collect and display materials (e.g photographs, records) of significance to the history of a local area; and
- to allow for research of materials held.
There are two potential options to securing DGR status, we consider each below:
Option 1: Securing DGR status as a public museum/library
Where the objects of an organisation permit, it may be possible seek DGR status under the public museum/library category (of Items 1 and 4 of the table in section 30-15(2) ) of the Income Tax Assessment Act 1997.
Taxation Ruling 2000/10 explores what is a public museum/library.
In relation to the primary matters that would be required to be established TR 2000/10 provides:
5. The terms ‘public library’, ‘public museum’ and ‘public art gallery’ are not defined in the Act. Nor are they technical terms. They are to be understood in their ordinary or everyday meaning. We expect a public library, public museum or public art gallery to have the following features:
- · its collection is made available to the public;
- · it is owned or controlled by a government or quasi-government authority, or by persons or an institution having a degree of responsibility to the public;
- · it is constituted as a library, museum or art gallery, other people recognise it as such, and it conducts itself in ways that are consistent with such a character; and
- · it is an institution.
Available to the public
6. We accept the collection of a library, museum or art gallery as being available to the public where it is for use by the public or a section of the public. If such access is minor, the institution is not a public library, museum or art gallery. It is not necessary that a collection be made indiscriminately available. Limitations on access can be consistent with availability to the public where they are to protect the collection, ensure orderly access and efficient operation.
7. We accept that students attending a public educational institution are a section of the public, in this context.
Public responsibility
8. We accept that persons or institutions have a degree of responsibility to the public in the circumstances explained in Taxation Ruling TR 95/27 at paragraphs 7, 21, 22 and 23.
9. Where a library, museum or art gallery is carried on by an organisation and operated for the profit or gain of its owners or members, the facility is not public. However, the charging of appropriate fees is not, in itself, inconsistent with being a public library, museum or art gallery.
Institution
10. An entity, whether a corporation, trust or government body, is accepted as a public library, museum, or art gallery itself, where the purpose and activities of the entity are wholly those of the library, museum, or art gallery. Where other purposes and activities are evident, we only accept the entity as a public library, public museum, or public art gallery if they are minor and consistent with the purposes and activities of a public library, museum, or art gallery.
11. Where an entity itself is not a public library, museum, or art gallery, a part of the entity may be accepted as a public library, museum, or art gallery provided:
- · the affairs of the library, museum, or art gallery are separate from the general affairs of the entity;
- · the public can readily distinguish the library, museum, or art gallery from the rest of the entity;
- · the collection is readily identifiable to the public as the public collection of a library, museum, or art gallery;
- · the accounts of the library, museum, or art gallery are separate from those of the rest of the entity; and
- · any gifts made to the library, museum or art gallery are used only for library, museum or art gallery purposes.
In relation to the requirement that “…it is constituted as a library, museum or art gallery, other people recognise it as such, and it conducts itself in ways that are consistent with such a character” TR 2000/10 provides:
Purpose and functions
24. Whether an institution is a public library, museum or art gallery depends on the purposes for which it is constituted, how people recognise it, and the ways it operates.
25. Matters that manifest the purpose for which an institution is constituted include its name, governing documents, objectives and policies, acquisition policy, advertising, staffing, and membership of associations. If these do not indicate the purpose of the institution is to be a library, museum or art gallery, we do not accept that it is such.
26. Libraries, museums and art galleries operate to collect, preserve and maintain their collections, and make them available for use. Museums also study, research and educate people in their fields of specialisation. If an institution’s activities are not consistent with these functions we do not accept it as a library, museum or art gallery. The mere possession of a collection of literature, artefacts or artworks is unlikely, on its own, to make an institution a library, museum or art gallery.
27. Accordingly, it is necessary to review an institution’s governing documents, the character of the services it provides, its objectives and policies, its acquisition policy, ownership of its assets, its controls, staffing, membership of associations and its financial organisation. Where purposes and activities other than those of a public library, museum or art gallery are evident, it is necessary to determine whether they are minor and consistent with the purposes and activities of a public library, museum or art gallery.
Collection
28. We do not specify what items can form the collections of libraries, museums and art galleries. However, we recognise that the nature of such institutions can place limits, especially in relation to cultural value and human interaction. We have accepted living plants and wild animals as the exhibits of museums. Buildings or places of historical significance can comprise a museum’s collection where they are used only in that way and are recognised by the public as such. For example, a court house may be of architectural and historical significance. However, if it still operates as a court house and is primarily regarded by the community as a court house, then the building and any funds donated towards its restoration would not be accepted as being for the purposes of a public library, public museum or public art gallery. Similarly, a memorial may be of historical significance; however, its primary function is as a memorial not as a museum.
29. The terms library, museum and art gallery imply that exhibits of literature, artefacts and art are collected. The collecting of exhibits of fauna and flora for holding and display may be consistent with the function of a museum. Such activity is absent in merely setting aside a natural area as a nature reserve, irrespective of the flora and fauna located in the reserve.
Use and display
30. Making their collections available for use is a distinguishing feature of libraries, museums and art galleries. The modes of use include lending, display, making available for reading (including over the Internet), and vary with the sort of institution and its particular purpose. The mere storage of artefacts without display or regular lending is insufficient.
31. The display of artworks or artefacts is not sufficient to be a museum or art gallery. They must be displayed in such a way that viewers engage them as part of the collection of the museum or art gallery. While display in a building or separate place may be most common, it is not essential. Display in a building or separate place enables an institution readily to distinguish the library, museum or art gallery from the rest of the institution. For other displays, the items must be clearly identifiable to the public as part of the particular collection. In addition, they must be integrated with the other functions of a museum or art gallery.
32. For example, a collection of statues and art work commissioned by a public authority and displayed in an open air forum could be accepted as a public art gallery where:
- ·it is clearly identifiable to the public as belonging to that public collection;
- ·it is supported by an administration consistent with an art gallery’s operation; and
- ·the collection was added to, maintained, publicised and operated in the normal manner of an art gallery.
The exhibits would need to be displayed in such a way that viewers are able to clearly identify the exhibits as belonging to the organisation’s museum or art gallery. In contrast, a display of works of art or artefacts scattered throughout a building that is used primarily for another purpose would not, of itself, be accepted as a public art gallery or museum.
33. To encourage the use, education and enjoyment of a collection, interactive displays may be provided. For example, railway preservation exhibits may entail the use of the exhibit. It is recognised that exhibits of this nature lend themselves to display of the use of the exhibit. Provided the purpose and other activities, such as collection, preservation, research and display, are consistent with being a museum, we accept that the train can comprise part of the museum where the exhibit is part of a permanent display made available to the public.
34. The occasional display of exhibits outside an institution’s premises can be consistent with the purpose of a library, museum or art gallery. Lending to other libraries, museums or art galleries is an accepted function.
Ownership and control of the collection
35. The ownership and control of its own collection is consistent with being a library, museum or art gallery. This does not prevent, of course, borrowing from other institutions. Artefacts or artworks not belonging to the institution or to other public libraries, museums or art galleries because, for example, they belong to enthusiasts, artists or dealers, are an indicator against it being a public library, museum or art gallery. Functions of merely providing facilities for display, storage and maintenance by private owners are not consistent with being a public library, museum or art gallery.
Preservation
36. A function of libraries, museums and art galleries is the preservation of their collections. A fundamental practice of collecting for only short periods followed by disposal is inconsistent with being a library, museum or art gallery. For example, an entire exhibition established for a limited term (for example, 12 months) and dismantled at the end of the term, is unlikely to satisfy this primary function. However, disposals as part of a regular program of maintenance can be an acceptable practice, depending on the sort of institution. This may be caused by the need for new exhibits.
Staffing
37. The employment of qualified librarians or curators, although not essential, is an indicator that an institution is a library, museum or art gallery. While the degree of expertise may vary with the size and nature of the institution, the lack of appropriate knowledge and skills may indicate the institution is not a library, museum or art gallery.
Organisations lacking the required purpose and function
38. A fund established to support a library, museum or art gallery would not, in itself, be recognised as library, museum or art gallery. However, public funds established under a will or instrument of trust solely to provide money, property or benefits to a public library, public museum or public art gallery may be accepted as ancillary funds for gift deduction purposes: see item 2 of the table in section 30-15 of the Act. These gift deductible funds are explained in Taxation Ruling TR 95/27.
39. Support organisations such as the ‘Friends of’ an art gallery or museum, are not accepted as libraries, museums or art galleries. The function and purpose of these groups are to provide support for these institutions; for example, assistance with education. Their purpose and function are not consistent with those of a public library, museum or art gallery, i.e., collection, preservation, research, study, education, display and maintenance of a collection. They may assist in the provision of any one or a number of these functions, but would not be responsible for delivering all functions. Nor would they be recognised by the public as libraries, museums or art galleries.
40. Hobby associations and clubs may display their personal collections to the public. Functions similar to a museum may be evident, such as display, collection, restoration, research and education. However, the overall function and purpose of the display is not consistent with a public library, museum or art gallery. The association exists primarily to provide services and facilities for its members.
41. An exhibition set up by a business as part of its promotion could have many similar functions to a museum. However, the collection is held to improve the efficiency of the business rather than for purposes consistent with being a museum.
42. A collection of resources may be accumulated over time and stored in a common area. The display of these resources would not, in itself, be accepted as a library, museum or art gallery. We would require the collection to incorporate other features of a public library, museum or art gallery. Display of a collection is only one of the functions of these institutions. The purpose and function of the collection should incorporate other features consistent with those of a public library, museum or art gallery.
43. Preservation schemes that encourage people to preserve their buildings of historical and architectural significance are not accepted as museums.
Many historical societies are recorded on the Australian Business Register as being DGR’s under Items 1 & 4.
In your case, consideration of your objects and activities against the above criteria would be required.
As the primary purpose of most historical associations is to collect and display to the public matters of historical significance to a local history there is a prima facie case you may be eligible to be a DGR.
It should also be noted that an organisation’s constitution must contain specific clauses (for example regarding the treatment of any donated monies if DGR status is lost or the organisation wound up). All of these additional requirements would also need to be considered.
Option 2: Securing DGR status via being included on the Register of Cultural Organisations
Section 30-100(1) at Item 12.1.1 provides DGR status for a ‘public fund’ that (when the gift is made) is on the ‘Register of Cultural Organisations’.
A ‘cultural organisation’ is defined in section 30-300 as:
(1) A cultural organisation is:
(a) a body corporate; or
(b) a trust; or
(c) an unincorporated body established for a public purpose by the Commonwealth, a State or a Territory;
that satisfies each requirement in this section.
(2) Its principal purpose must be the promotion of literature, music, a performing art, a visual art, a craft, design, film, video, television, radio, community arts, arts or languages of * Indigenous persons or movable cultural heritage.
(3) It must maintain a public fund that meets the requirements of section 30-130, or would meet those requirements if the * cultural organisation were a fund, authority or institution.
(5) It must not pay any of its profits or financial surplus, or give any of its property, to its members, beneficiaries, controllers or owners (as appropriate).
(6) It must have agreed to comply with any rules that the Minister and the * Arts Minister make to ensure that gifts made to the fund are used only for its principal purpose.
(7) It must have agreed to give the * Arts Secretary, at intervals of 6 months, statistical information about gifts made to the public fund during the last 6 months.
To apply for and be eligible to be added to the Register of Cultural Organisations you should refer to the guidelines governing eligibility and the registration process. The guidelines governing eligibility and the registration process can be viewed here.
The requirements of a ‘public fund’ are regulated by section 30-130 as follows:
Maintaining a gift fund
(1) The entity must maintain for the principal purpose of the fund, authority or institution a fund (the gift fund ):
(a) to which gifts of money or property for that purpose are to be made; and
(b) to which contributions described in item 7 or 8 of the table in section 30-15 in relation to a * fund-raising event held for that purpose are to be made; and
(c) to which any money received by the entity because of such gifts or contributions is to be credited; and
(d) that does not receive any other money or property.
(2) The entity must use the gift fund only for the principal purpose of the fund, authority or institution.
Exception–only one gift fund required per entity
(3) An entity that operates 2 or more funds, authorities or institutions also meets the requirements of this section for 2 or more of those funds, authorities or institutions by maintaining a single gift fund if:
(a) the gift fund meets the requirements in paragraphs (1)(a), (b) and (c) in respect of each of the funds, authorities or institutions for which the gift fund is maintained; and
(b) the gift fund does not receive any other money or property.
(4) The entity must use a gift or contribution made to the fund and any money credited to the fund only for the principal purpose of the fund, authority or institution to which the gift, contribution or money relates.