Senate

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello MP)

Chapter 11 New deductible gift recipient categories

Outline of chapter

11.1 Schedule 11 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to create five new general categories of deductible gift recipient (DGR).

Context of amendments

11.2 Subsection 30-15(2) of the ITAA 1997 allows a tax deduction to taxpayers who make a gift or contribution to a fund, authority or institution covered by the tables in Subdivision 30-B, subject to some conditions.

11.3 There are more than 30 existing general DGR categories. Organisations which meet the criteria under these categories can request endorsement from the Commissioner of Taxation (Commissioner) as a DGR. Gifts of $2 or more in cash or property to DGRs may be tax deductible.

11.4 In the 2005-06 Budget, the Government announced that it would establish five new DGR categories to cover war memorials, disaster relief, animal welfare, charitable services and educational scholarships.

Summary of new law

11.5 These amendments streamline current DGR specific listing arrangements and provide a more consistent framework for assessing applications for DGR status.

11.6 This measure allows taxpayers to claim an income tax deduction for certain gifts of money or property to the following types of organisations that are endorsed as DGRs:

•

public funds established and maintained for the reconstruction or critical repair of a damaged war memorial;

•

public funds established and maintained by a public benevolent institution solely to provide money to assist in providing relief to people (including assistance to re-establish a community) in distress as a result of declared natural or man-made disasters in a developed country, and public funds established and maintained for charitable purposes solely to provide money for relief of people and re-establishing a community in distress as a result of declared disasters which occur in Australia;

•

charitable institutions with a principal activity of providing short-term direct care to animals that are lost, mistreated, without owners and/or are rehabilitating those animals if they are orphaned, sick or injured;

•

charitable institutions that would be a public benevolent institution except that they also undertake activities that would fall under the existing DGR categories of a health promotion charity and/or a harm prevention charity; and

•

public funds that are established for charitable purposes solely to provide money for scholarships, bursaries or prizes to promote education where entry is open to persons at a national, state, territory or regional level.

Comparison of key features of new law and current law

Detailed explanation of new law

11.7 These amendments establish five new DGR categories to cover war memorials, disaster relief, animal welfare, charitable services and educational scholarships.

War memorials

11.8 A public fund is eligible to be endorsed by the Commissioner as a DGR if it is set up solely to provide funds for the reconstruction or critical repair of a war memorial. [Schedule 11, item 6, item 5.1.3 in the table in subsection 30-50(1)]

11.9 The term 'war memorial' follows the ordinary dictionary meaning. The structure must be clearly identifiable as a memorial. It must also be a memorial:

•

situated in Australia (including its external territories and territorial seas);

•

that either commemorates events in a conflict in which Australia was involved or commemorates people (most of whom are Australian) who participated on Australia's behalf in a conflict;

•

that is a focus for public commemorations; and

•

that is solely or mainly used for public commemorations.

[Schedule 11, item 6, item 5.1.3 in the table in subsection 30-50(1)]

11.10 This general DGR category would not include funds established for:

•

repairing public amenities such as community memorial halls, swimming pools, club buildings, hospitals and sports grounds, even if they are named as a memorial or contain a plaque;

•

repairing memorials to individuals;

•

repairing memorials operated for a commercial purpose;

•

maintaining memorials; and

•

maintaining or repairing memorial surrounds.

11.11 Examples of memorials eligible for DGR status would include structures such as statues, honour rolls, decorative gates, monuments, obelisks, ornamental bridges and fountains, that are a focus for public commemorations. Trees may be considered war memorials where it can be demonstrated that they are the memorial and not the memorial surrounds.

Example 11.1

The Goulding Memorial consists of a decorative gate at the entrance to a community garden. The decorative gate is inscribed with a dedication to the Australian soldiers who fought in the Vietnam War and is the focus of community commemorations. The decorative gate meets the criteria of a war memorial but the community garden does not. Accordingly, any public fund established to replace the trees, pathways or gardens would not be eligible for endorsement under the war memorials category as it would not be limited to critical repair of the memorial structure (the gate).

Example 11.2

Each ANZAC Day, Martinville residents gather for commemorations at their local World War I memorial which consists of a row of elm trees - one tree and one plaque for each fallen soldier from Martinville. The community accepts that the row of trees is a single memorial to the town's World War I victims, not a collection of separate memorials to individuals. The trees of the Martinville Memorial were severely damaged and many of the trees were uprooted during a storm. A public fund is established to collect funds for the repair and replacement of the damaged and destroyed trees. This public fund is eligible for endorsement under this general category as the trees qualify as a single memorial and the work required qualifies as critical repair or reconstruction.

11.12 Reconstruction of a war memorial would involve repairing significant and unforseen damage to a memorial resulting from an event such as fire, vandalism, flooding or earthquake. Critical repair arises where a failure to repair the damage (however caused) could endanger public safety and significantly compromise the structural integrity of the memorial.

Example 11.3

A part of the supporting structure of the Smithville Community Memorial statue for World War II veterans sustained severe damage due to a lightning strike, resulting in a risk to public safety from the damaged memorial. The memorial is used for Smithville Community commemorations. A public fund is set up to collect funds to repair the damage. This public fund is eligible for endorsement as a DGR because it is collecting funds to be used to repair critical damage of an eligible memorial.

11.13 Reconstruction also extends to replacing a memorial which is badly damaged and cannot be repaired. DGR funds can only be used to build a similar memorial and cannot be used to expand or significantly alter the memorial.

11.14 Reconstruction and critical repair do not cover maintenance, expansion or improvement of an existing memorial, repairs that are routine in nature, or repairs that are desirable but not essential.

Example 11.4

A group of Happyville residents has set up a public fund to add a bell tower to the town's memorial commemorating Australian World War I victims. This public fund is not entitled to DGR status under the general category because the fund is established for expanding a war memorial, not for its critical repair or reconstruction.

11.15 DGR support extends to gifts made to eligible public funds for a maximum period of two years. This time limit applies to ensure that the DGR funds are collected for reconstruction and critical repair and not for maintenance of memorials.

11.16 Once the two years has ended, the public fund cannot continue to collect tax deductible donations, however it may continue to operate to complete reconstruction or critical repairs to the memorial for which DGR support was initially conferred.

11.17 A public fund can only provide funds for the reconstruction or critical repair of one war memorial.

Disaster relief

11.18 Public funds established solely to assist in providing relief to people (including assistance to re-establish a community) in distress as a result of declared natural or man-made disasters may be eligible for endorsement by the Commissioner. The criteria for endorsing those funds providing relief in Australia differ from those providing relief in a developed country. [Schedule 11, item 4, item 4.1.5 in the table in subsection 30-45(1 ); item 5, section 30-46 ; item 8, item 9.1.2 in the table in subsection 30-80(1 ); and item 11, section 30-86]

11.19 DGR status through the disaster relief category is only extended to developed countries, where a developed country is one that has not been declared by the Minister for Foreign Affairs as a developing country. Disasters which occur in countries classified by the Minister for Foreign Affairs as developing countries may be eligible for DGR support under the international affairs DGR general category (section 30-80 of the ITAA 1997). [Schedule 11, item 8, item 9.1.2 in the table in subsection 30-80(1)]

11.20 An eligible disaster under this category must meet both of the following conditions:

•

it developed rapidly; and

•

it resulted in the death, serious injury or other physical suffering of a large number of people, or in widespread damage to property or the natural environment.

[Schedule 11, items 5 and 11, sections 30-46 and 30-85]

11.21 A disaster might be considered to have 'developed rapidly' if it developed over a number of weeks, but not if it developed over a number of years.

Example 11.5

Cyclone Bob developed off the coast of Queensland, remaining over the ocean for 14 days before crossing the coast and causing significant damage to Smallville. For the purposes of this category, Cyclone Bob is considered to have developed rapidly.

Example 11.6

A bushfire started in thick forest in a remote area of New South Wales. The fire burned for 21 days, growing in intensity before it reached the city of Albie, causing substantial damage. For the purposes of this category, the fire is considered to have developed rapidly.

Example 11.7

Mickleborg had not received rain for two years. Mickleborg's local council started introducing water restrictions to preserve the town's water supply. One year later, Mickleborg had still not received rain and the town was declared to be in drought. For the purposes of this category, the drought did not develop rapidly.

11.22 Examples of disasters which are likely to be eligible under this category include: fire, earthquake, flood, storm (including hailstorm), cyclone (including typhoon and hurricane), storm surge, tornado, landslide, tsunami, meteorite strike, volcanic eruption, plague, terrorist act, large scale transport accident or chemical accident, epidemic or war-like action. Crop and animal diseases may qualify if these developed rapidly and resulted in significant damage to property or the natural environment which affected a large area or injury to a large number of people.

Example 11.8

Mr Smith's pumpkin crop is destroyed by a disease. A public fund is set up to relieve the hardship of Mr Smith due to the loss of income. This public fund is not eligible for endorsement under the disaster relief category because the crop disease did not affect a sufficiently large area to attract a declaration of a disaster or a state of emergency from the relevant minister.

Example 11.9

Mr Brown's pumpkin crop was one of many crops in the region destroyed by disease. The relevant state or territory minister declares the effect of this crop disease as a disaster. A public fund which is set up to relieve distress in the region as a result of the crop disease would be eligible for endorsement under this category.

11.23 Funds for relief from global warming, drought, land salinity, and soil erosion would not be eligible for this category as they do not develop rapidly.

11.24 In providing relief after a declared disaster, public funds can be used to assist in the delivery of short to medium-term relief and recovery efforts to alleviate hardship and suffering in communities severely affected by eligible disasters. Public funds may also use donations to prevent a community from facing further danger from the disaster.

Example 11.10

Much of Porpoise Spit was destroyed or badly damaged in a recent cyclone. A public fund is set up to provide relief to the residents of Porpoise Spit as a result of the cyclone. The public fund also provides funds to prevent an imminent landslide which may occur as a result of the loss of a significant number of trees which were destroyed during the cyclone. The public fund is eligible for endorsement as a DGR.

Disasters that occur within Australia

11.25 A public fund is eligible to be endorsed by the Commissioner as a DGR where it is established and maintained for charitable purposes solely to provide funds for the relief (including assistance to re-establish a community) of people in Australia who have suffered a disaster which is declared and meets the relevant criteria. [Schedule 11, item 4, item 4.1.5 in the table in subsection 30-45(1 ); and item 5, section 30-46]

11.26 For the purposes of this category, an event must be declared by or with the approval of the relevant state or territory minister as a disaster or state of emergency, in addition to meeting the other conditions outlined in paragraph 11.20. [Schedule 11, item 5, section 30-46]

Example 11.11

Nick's house, which is situated in Australia, was flooded due to a burst water pipe. A public fund is established to provide funds to help repair Nick's house and replace his damaged furniture. This public fund is not eligible for endorsement as a DGR under this category for a number of reasons. First, the event was not declared by the relevant state or territory minister as a disaster or state of emergency. Secondly, it did not cause widespread damage across the community and finally, this public fund is not established for public charitable purposes as it is established for the benefit of an individual, not a community.

11.27 Gifts made to a public fund under this category are deductible for two years from the date of the disaster or emergency specified in the state or territory minister's declaration (or a declaration made with the approval of the state or territory minister), or otherwise on the date of the declaration. Once the two years have ceased, the public fund cannot continue to collect tax deductible donations, but it may continue to operate in undertaking purposes for which DGR status was conferred under the category. [Schedule 11, item 5, section 30-46]

Example 11.12

Numerous community buildings in Mt Wannamanna, Australia, were damaged in a recent storm and the process of rebuilding was slow due to a lack of funds. A public fund was set up six months after the date of the disaster, as declared by the state minister, to provide funds to assist with the reconstruction. This public fund can receive DGR status because the disaster was declared by the minister, and had caused widespread damage; however DGR status can only be received for a maximum period of one and a half years (ie, ending two years after the disaster occurred).

Disasters that occur in a developed country

11.28 A public fund is eligible to be endorsed by the Commissioner as a DGR where it is established and maintained by a public benevolent institution solely to provide funds for the relief (including assistance to re-establish a community) of people in a developed country that has suffered a disaster recognised by the Treasurer. [Schedule 11, item 8, item 9.1.2 in the table in subsection 30-80(1 ); and item 11, section 30-86]

11.29 The Treasurer's recognition of a disaster must be announced publicly and must specify the day (or the first day) the disaster is taken to have occurred or commenced. [Schedule 11, item 11, section 30-86]

Example 11.13

Ycart, a town situated in a developed country, sustained severe damage as a result of a tsunami leading the Treasurer to recognise it as a disaster for tax deductibility purposes. An existing Australian public benevolent institution, the Giving Society, set up a public fund to collect funds to assist with the relief of people in the Ycart community. The public fund is eligible for endorsement as a DGR under the disaster relief category.

11.30 The public benevolent institution should ensure that the funds provided by the public fund are used solely for the purpose intended. This could be met where the delivery of relief and recovery assistance in the developed country is undertaken by an agent appointed by the public benevolent institution, based in the disaster-affected country, working on the public benevolent institution's behalf.

11.31 DGR support under this category will be restricted to a maximum period of two years after the date of the disaster specified in the Treasurer's declaration. Once the two years have ceased, the public fund cannot continue to collect tax deductible donations, however it may continue to operate in undertaking the principal purpose to which DGR status was conferred under the category. [Schedule 11, item 11, section 30-86]

Animal welfare

11.32 A charitable institution is eligible to be endorsed by the Commissioner as a DGR where its principal activity is one or both of:

•

providing short-term direct care to animals (but not only native wildlife) that have been lost, mistreated or are without owners; and/or

•

rehabilitating orphaned, sick or injured animals (but not only native wildlife) that have been lost, mistreated or are without owners.

[Schedule 11, item 4, item 4.1.6 in the table in subsection 30-45(1)]

Example 11.14

Furry Friends is a charitable institution whose principal activity is to provide short-term care for lost and injured cats, dogs and horses. Furry Friends' intent is to find new homes for all of the animals it shelters. While some animals take longer than others to find new homes, the majority are eventually given new homes. However, Furry Friends has difficulty in finding homes for some of its horses and these are cared for by Furry Friends for the rest of their lives. As Furry Friends' main activity is to provide short-term direct care to injured and lost animals, it is eligible for endorsement under this category. The long-term care that Furry Friends provides to a small portion of its animals does not affect its eligibility for endorsement.

Example 11.15

Animal Care is a charitable institution which rehabilitates injured wildlife that have been brought in by the public and also operates a shelter for lost and unowned pets. Animal Care releases the majority of the wildlife back into their natural environment. Animal Care also aims to find new homes for all the pets it cares for. However, due to the large volume of pets coming to Animal Care, many are put down because they cannot be given new homes. Animal Care is eligible for endorsement under this category because it rehabilitates injured animals and provides short-term care to animals without owners.

11.33 The animal welfare DGR category will not extend to the endorsement of organisations which are established solely to protect native animals. Public funds which are established solely to protect native animals may be eligible for DGR endorsement under the existing general category of environmental organisations (section 30-55 of the ITAA 1997). [Schedule 11, item 4, item 4.1.6 in the table in subsection 30-45(1)]

Example 11.16

Zulu Animals operates a fleet of vehicles which rescue native animals that have been injured by natural disasters or cars. Zulu Animals does not rescue or rehabilitate any non-native animals. Zulu Animals rehabilitates the native animals until they return to full health. As Zulu Animals only cares for native animals, it is not eligible for endorsement under this category. It should instead apply for endorsement under the environmental organisations DGR category.

11.34 Charitable institutions which are endorsed under this category may undertake other minor activities which further their charitable purpose, such as providing veterinary services and promoting the prevention of cruelty to animals. However, the principal activity of the organisation must be to provide one or both of short-term direct care to animals that have been lost, mistreated or are without owners or the rehabilitation of those animals that are sick or injured.

Example 11.17

Ardnas Inc is a charitable animal rescue institution which rehabilitates native and non-native animals that have been hit by cars or injured by natural disasters. Ardnas Inc also operates a shelter for unwanted animals and provides an animal hospital service to members of the public. This animal hospital service only accounts for a small portion of Ardnas Inc's activities. As the principal activity of Ardnas Inc is rehabilitating injured animals, it is eligible for endorsement under this general category.

Example 11.18

Alix's Animals is a charitable institution which has a principal activity of providing short-term direct care, through its pet shelter, to pets that no longer have owners. To help fund the pet shelter, Alix's Animals also operates a boarding kennel and an opportunity shop which sells second hand animal accessories. Both of these activities are minor activities and therefore do not affect Alix's Animals' eligibility for endorsement under this category.

11.35 Institutions which have a principal purpose of advocating a political party or cause, attempting to change the law or government policy, or promoting a particular point of view are not charitable, and are therefore not eligible for endorsement under the animal welfare general category. However, if an entity's activities are otherwise charitable, the presence of political, lobbying or promotional activity that is only incidental to the dominant charitable purpose, will not prevent the institution from being a charity.

Example 11.19

Abba Animals is an institution which has the principal activity of providing information and lobbying the government on animal rights and educating the public on how to care for their pets. Abba Animals would not be eligible for endorsement under this category even if it was a charitable institution as it is not providing animals with short-term direct care or rehabilitation.

11.36 Groups which are not charitable include those which are opposed to vivisection or the use of animals for research, anti-livestock production groups, anti-whaling groups, anti-logging groups and anti-circus groups.

Charitable services

11.37 A charitable institution is eligible to be endorsed by the Commissioner as a DGR where it would have been a public benevolent institution except that in addition to its public benevolent institution activities it undertakes one or both of the following:

•

it also promotes the prevention or the control of disease in human beings (but not as a principal activity); and/or

•

it also promotes the prevention or the control of behaviour that is harmful or abusive to human beings (but not as a principal activity).

[Schedule 11, item 4, item 4.1.7 in the table in subsection 30-45(1)]

11.38 A public benevolent institution is a not-for-profit institution organised for the direct relief of poverty, sickness, suffering, distress, misfortune, disability or helplessness. The characteristics of a public benevolent institution are:

•

it is set up for needs that require benevolent relief;

•

it relieves those needs by directly providing services to people suffering them; and

•

its dominant purpose must be to provide benevolent relief.

Example 11.20

Gift Givers is a charitable institution whose objectives are relieving poverty and improving health outcomes of people suffering from arthritis. It carries out its objectives by providing hostel accommodation for the homeless (which accounts for 45 per cent of its activities), and by providing health information about arthritis to health professionals, carers and the public. The provision of health information accounts for 45 per cent of its activities. It also prepares and publishes research papers about poverty, but these activities are minor in extent and importance.

Gift Givers would qualify as a public benevolent institution but for its work on health information about arthritis. As the provision of health information is not its principal activity, Gift Givers is eligible for endorsement under this category.

11.39 The charitable services category does not provide DGR status to organisations that are established solely to promote the prevention or the control of disease in human beings; or solely to promote the prevention or the control of behaviour that is harmful or abusive to human beings. Where an institution falls into the former category, it may be eligible for endorsement under section 30-20 of the ITAA 1997 (as a health promotion charity). Where an institution falls into the latter category, it may be eligible for endorsement under section 30-45 of the ITAA 1997 (as a harm prevention charity). [Schedule 11, item 4, item 4.1.7 in the table in subsection 30-45(1)]

Example 11.21

Helping Hands is an organisation which has a principal activity of promoting the prevention or control of harmful or abusive behaviour among humans. Helping Hands is not eligible for endorsement under this category. Helping Hands should instead apply for endorsement under the category of harm prevention charity.

11.40 A charitable institution which is endorsed under the charitable services category will also be eligible for a capped fringe benefits tax (FBT) rebate. The rebate is equal to 48 per cent of the gross FBT payable, subject to the capping threshold. The maximum grossed-up value of benefits that can be provided to any one person employed by the institution (without losing the concession) is $30,000.

Educational scholarships

11.41 A public fund established for charitable purposes is eligible for endorsement as a DGR by the Commissioner if its sole purpose is to provide money for scholarships, bursaries or prizes that promote education. [Schedule 11, item 1, item 2.1.13 in the table in subsection 30-25(1);and item 2, section 30-37]

11.42 Scholarships and bursaries are ongoing or one-off benefit payments, which are open to students at a national, state, territory or regional level, and which usually comprise payment for school fees, textbooks and other related educational expenses such as to cover uniforms, travel or boarding costs. Scholarships and bursaries may be awarded to fund education at a particular school or higher education institution. Scholarships and bursaries are usually awarded on the basis of merit or for reasons of equity. For the purposes of this category, reasons of equity would cover students who are experiencing socio-economic disadvantage or hardship.

Example 11.22

Sandra is a student at Eastern Girls' College. Sandra's parents are experiencing financial hardship and can no longer pay her school fees, and she will have to move to another school. A public charitable fund is set up to collect funds to provide a bursary to Sandra to assist with the payment of her school fees to Eastern Girls' College. The public fund is not eligible for endorsement under this category because the bursary is open to just one student. The bursary would need to be open to all students in necessitous circumstances from at least a region to qualify.

Example 11.23

A charitable fund is set up to provide scholarships to students from a remote area to attend higher education training. The scholarship is open to students in the rural areas of Western Australia, Northern Territory and South Australia. Eligibility is assessed against a set of criteria to determine the greatest level of need, including economic circumstances, distance from the nearest school and the student's academic ability. The public fund is eligible for endorsement under this category as it is open to a region of 200,000 people or more and its award is based on assessment against an objective set of criteria.

11.43 A prize is an award of money or property, which is open to students at a national, state, territory or regional level, and is usually conferred for reasons of merit such as academic achievement, but may also include reasons of equity.

11.44 Taxpayers may claim a tax deduction when they donate to a public fund which has a sole charitable purpose of providing money for eligible scholarships, bursaries or prizes which are:

•

awarded to Australian citizens or permanent residents on a merit basis or for reasons of equity;

•

open to individuals or groups of individuals throughout the nation, a state, a territory or a region (where a region is at least 200,000 people); and

•

for the purpose of promoting education in pre-school, primary school, secondary school or tertiary courses in Australia; and/or

•

allows recipients to further courses of study they began at educational institutions in Australia at educational institutions overseas.

[Schedule 11, item 2, section 30-35]

11.45 The scholarship, bursary or prize must be open only to students who are Australian citizens or permanent residents of Australia. For the purposes of this category, the definition of these terms will be those used in the Australian Citizenship Act 1948 or subsequent Acts. [Schedule 11, item 2, section 30-37]

11.46 Under this category, the definitions of pre-school, primary school, secondary or tertiary courses have the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 . [Schedule 11, item 2, section 30-35 and items 19 to 22, subsection 995-1(1)]

Example 11.24

Julieanne sets up a public fund to provide money for a scholarship to attend a class conducted by her to teach interested individuals how to crochet. The public fund advertises the crochet scholarship throughout the Australian Capital Territory. Although the public fund is set up to fund a scholarship for educational purposes and the scholarship is open to students across a territory, the public fund is not eligible for endorsement under this category as Julieanne's course does not meet the definitions of a pre-school, primary school, secondary or tertiary course.

11.47 The scholarship, bursary or prize must be for the promotion of education, but does not cover community service awards. The promotion of education includes music, sport and agriculture, provided that the course is a pre-school, primary school, secondary or tertiary course.

Example 11.25

A public fund is set up for charitable purposes to provide funds for a scholarship to attend Wenton High School. The scholarship is open to students throughout the region to pursue their high school studies. The scholarship will be awarded to the student who has the most promising talent at playing football and also has good academic results. This public fund will be eligible for endorsement under this category because it promotes education, it is awarded on a merits basis and is provided for attendance at a secondary school course.

Example 11.26

A public fund is set up for charitable purposes to provide funds for a scholarship to attend the Acme Music Academy, which is not a registered training organisation (and therefore does not qualify as a tertiary course). The scholarship is open to promising music students across the nation and will be awarded to the best musician. As the Acme Music Academy is not a registered training organisation, the public fund does not fund scholarships to attend a tertiary course. Therefore, the public fund is not eligible for endorsement under this category because the Acme Music Academy does not provide courses which qualify as a pre-school, primary, secondary or tertiary course.

Example 11.27

West High School provides a prize each year for a student who has demonstrated a high level of community service to the school. A charitable public fund is established to expand the scope of the prize to open it to all students in the region who have demonstrated community service to the state. The public fund is not eligible for endorsement under this category, because it is not for the promotion of education in a pre-school, primary, secondary or tertiary course.

11.48 Scholarships, bursaries and prizes cannot be awarded in substitute for paying reduced school fees. Donations to public funds established for charitable purposes to provide funds for scholarships, bursaries and prizes must be made voluntarily and cannot result in reduced payment of school fees for the donor's relative or associate.

Example 11.28

Tetra College set up a public fund to collect funds for scholarships for its students. Enrolment in Tetra College is conditional on the child's parents making a payment to the public fund in return for reduced school fees. In turn each student is nominally given a 'scholarship' to the value of the payment. The public fund is not eligible for endorsement under this category because the payment to the fund was compulsory, only students of Tetra College were eligible to receive the scholarship and the scholarship was not awarded on a merit basis.

11.49 Entry to the scholarship, bursary or prize must be open to students at a national, state, territory or regional level. However, the public fund may impose a reasonable criterion or eligibility conditions to ensure that the scholarship, bursary or prize is appropriately targeted on the basis of academic merit or for reasons of equity.

Example 11.29

A public fund is established for charitable purposes to fund a scholarship. The scholarship is open to all students from Victoria with a Masters degree in botany (from any institution) to complete a Doctoral degree in botany at North University (which is situated in Australia). As the scholarship is open to the state, restricting access to the students who have studied botany does not preclude eligibility for DGR status under this category.

Example 11.30

A public fund is established to fund a scholarship. The scholarship is open to children whose parents are members of a nationwide club. While the scholarship is open to the nation, restricting access to the children of parents at a particular club goes beyond restricting eligibility to ensure the scholarship is awarded on the basis of merit or equity. Therefore, restricting eligibility in this way prevents eligibility for DGR status under this category, even if it was a charitable fund.

11.50 The scholarship, bursary or prize must be open to students across the region, state, territory or nation. It is not sufficient to simply collect donations across the region while only students at a particular school are eligible to enter.

Example 11.31

Mt Atom Secondary School conducts an annual speech and award night. Each year, the top student in each subject is awarded a prize and the dux of the school is awarded a scholarship to attend the Australian university of their choice. The prizes and the scholarship are only open to students at the school. A public, charitable fund is established to collect donations from the community. This fund is not eligible for endorsement under this category as the prizes and the scholarship are only open to all students at the school. Endorsement as a DGR under this category can only be given where the prizes and scholarship are open to students from at least the region. It is not sufficient to only collect donations from the region.

11.51 Scholarships, bursaries and prizes that allow students to complete a component of a course commenced in Australia at an overseas institution are eligible under this category.

Example 11.32

A public charitable fund is established to provide a prize to allow the top student studying their final year of Japanese history in an Australian university to complete their final year at a Japanese university. The Japanese component of the course will be credited towards the Australian course. The prize is open to all second-year Japanese history students in Australia (who are Australian citizens or permanent residents) and will be awarded to the student with the highest marks. The public fund is eligible for DGR endorsement under this category.

Application and transitional provisions

11.52 These amendments apply after 30 June 2006. [Schedule 11, item 23]

11.53 To differentiate between the new disaster relief category and the existing international affairs category in section 30-80, references to 'relief fund' are substituted by 'a developing country relief fund'

[Schedule 11, items 7 to 9] . Any declaration which is in force under section 30-85 immediately before the commencement of item 6 of Schedule 11 is taken to be a declaration that the public fund is a developing country relief fund [Schedule 11, item 24] .

Consequential amendments

11.54 Consequential amendments specify that the existing relief fund in section 30-80 of the ITAA 1997 relates to developing countries. [Schedule 11, items 7 to 9 and subsections 30-80(1), 30-85(2) and (4)]

11.55 A consequential amendment will be made to update the reference to the Australian Citizenship Act 1948 when the new citizenship law receives Royal Assent. [Schedule 11, item 3, paragraph 30-37(a)]

11.56 The index to Division 30 of the ITAA 1997 is updated to include the five new DGR categories. [Schedule 11, items 12 to 18, subsection 30-315(2)]

11.57 The Dictionary definitions in the ITAA 1997 are updated to include definitions of pre-school course, primary course, secondary course and tertiary course. [Schedule 11, items 19 to 22, subsection 995-1(1)]