By Alison Cross, Senior Associate

Following the introduction of the Taxation Administration (Community Charity) Guidelines 2025 (Cth) last year, the Australian Taxation Office (ATO) has published updated guidance clarifying the operation of the new deductible gift recipient (DGR) category for community charities. This article provides further detail on eligibility, governance expectations, and the pathway to endorsement.

What is a community charity?

The Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Act 2024 (Cth) creates two new general DGR categories:

• community charity trust, and
• community charity corporation,

(together, community charities).

A community charity is a charity that is established for both of the following purposes:

• providing money, property, or benefits to a DGR (other than a community charity) for any of the purposes for which the DGR may receive such gifts; and
• engaging in the principal activity of a DGR (other than a specifically listed DGR or a community charity) or pursuing the principal purpose of such a DGR.

Importantly, an organisation cannot simply become a community charity by applying to the Australian Charities and Not-for-profits Commission (ACNC) and ATO. Community charity status requires:

• a ministerial declaration confirming the organisation as a community charity;
• registration as a charity with the ACNC; and
• ATO endorsement for DGR purposes.

Once endorsed, the Treasury Minister’s Guidelines become binding and form part of the charity’s conditions of endorsement.

What the New ATO Guidance Covers

In October 2025, the ATO released new guidance which provides preliminary clarity on several key areas:

1. Eligibility Criteria

The guidance outlines the structural and operational requirements an entity must meet prior to seeking endorsement, including evidence of being:

• ACNC registered;
• ministerially declared; and
• operating exclusively for the required purposes.

2. Governance Expectations

The ATO reiterates that community charities must comply with the Treasury Minister’s Guidelines, including:

• undertaking regular self-reviews to ensure the community charity remains eligible for DGR endorsement;
• maintaining adequate accounting and other records that detail and explain all transactions;
• submitting annual returns for each financial year; and
• complying with annual minimum distribution requirements (4% of the market value of their net assets each financial year).

 

3. Endorsement Process

The updated guidance provides an overview of the ATO’s approach to endorsement, including:

• documentation the ATO will require at application stage; and
• circumstances where endorsement may be refused or revoked.

The ATO emphasises that endorsement is conditional on ongoing compliance with the Guidelines and ACNC obligations.

Key Takeaways

• The ATO has begun to implement the DGR reforms by issuing guidance specific to community charity trusts and corporations.
• Entities must be ACNC registered, ministerially declared, and operate solely for the required purposes before applying for DGR endorsement.
• The governance and distribution obligations are designed to ensure transparency, accountability, and active charitable engagement.
• The ATO is expected to release further guidance as the framework matures and more entities progress through the endorsement process.