Community sheds for both men and women are seen as not-for-profit organisations in the eyes of the Australian Taxation Office (ATO). These sheds provide a range of activities for members for the advancement of mental heath and also preventing or relieving social isolation. Because of this, these sheds can now apply to be a Deductible Gift Recipient (DGR).
The ATO has announced a new category of DGR for which community sheds can apply. Donors of $2 of more to an endorsed community shed will generally be able to claim an income tax deduction.
To be eligible, a community shed must satisfy the following:
- Have an active ABN
- Be located in Australia
- Be registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC)
- Have a DGR winding up and revocation clause
- Have the characteristics of a Community Shed
Characteristics of a Community Shed
To be eligible, a community shed must be focussed on advancing mental health and preventing or relieving social isolation and include activities such as sharing hobbies and interests, or participating in community projects. This can be achieved through providing a physical location and supporting individuals to work on projects or undertake other activities in the company of others in that location.
Membership should be open, or open to members of a particular gender or with Indigenous heritage, or both. A policy must be set in place that clearly states how members are nominated and approved and be reflected in the governing rules.
As a public institution, a DGR community shed should have a distinct structure that undertake activities on its own behalf, open to the public, and not set up for private gain or profit.
Restrictions for joining an activity should not be imposed on membership on matters such as age, ethnicity or background.
Winding Up And Revocation Clause
If a DGR is wound up or their endorsement revoked, all remaining gifts, deductible contributions and money received in relation to such gifts need to be transferred to another DGE with similar objectives.
For a community shed to be endorsed as a DGR, you must state your charitable purpose, your not-for-profit character, the way you operate, your decision making process and winding up documents. The ATO will review each application and make sure all requirements are met.
The ATO will take up to 289 days to process your request after receiving all required information. Once you are endorsed, you will be added to the ABN lookup on the Australian Business Registry so that donors can confirm your shed can receive tax-deductible gifts.
Tax Deductible Gifts And Donations
The donations your community shed can receive can be either money or property, such as tools and equipment. People who donate are entitled to receive a tax deduction on their income tax return. For their donation or gift to be tax deductible it must:
- Be a gift where the donor does not receive a material benefit in return such as donating into a collection box
- Be a contribution where the donor receives a material benefits such as membership fees or purchasing tickets to a fundraising dinner
Gift types include money of $2 or more, property such as tools or supplies that are purchased during the 12 months before making the gift or that the ATO values at more than $5,000 or trading stock.
Pro Tax Tip: It is up to the donor to value their donation when claiming their tax deduction
Be aware that you can provide your donor with a token of appreciation, such as a sticker or mention in a newsletter to be considered a gift. The gift may be prevented from being a tax deduction if your token of appreciation is valued at more than the donation.
Your Community Shed will be required to keep all records of all tax deductible gift and contributions made. You may issue receipts when your DGR receives a gift, a contribution for a fundraising event or if you sell goods through an auction, but you are not required to do so. If you do issue a receipt, you must include certain information so that your donor may claim a tax deduction.
Receipts from a DGR must state:
- A clear name of your organisation so that it can be easily identified
- Your Australian Business Number (ABN)
- Information about the fundraising event that was attended
- The contribution amount
- A GST inclusive market value of the benefit received in return for the contribution
If you offer a receipt for contributions for an auction, you’ll also need to state that the contribution was made for a successful bid at a fundraising event.
Pro Tax Tip: If you don’t offer a receipt, let your donors know they can use other records, such as bank statements, a statement from their employer, a stamped deposit slip, credit union or other financial account records, shopping centre docket or account record of a supplier when they lodge their income tax return. If your donor has made a donation through a bucket appeal, let them know they can claim up to $10 for total contributions made without a receipt.
An ITP Accounting Professional can help your Community Shed plan, apply to become a DGR and organise your reporting obligations. Phone 1800 367 487 and chat with a friendly professional today.