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Saturday, 09 September 2017 11:21

Tax Deductibility Status of Donations to Environment Groups Under Threat

STEP’s public fund, the Environment Protection Fund, is registered as a Deductible Gift Recipient (DGR) via the Register of Environmental Organisations administered by the Department of Environment and Heritage. This means that donations to the fund can be claimed as a tax deduction.

We have received the annual return form. This form used to be a simple exercise especially for a small organisations like STEP. However this time there are more questions. The government wants to know the breakup of the application of donations in categories of on-ground environmental remediation (no definition provided), research, education, advocacy, legal, overseas, administration and staff. Is this question anticipating a change in the eligibility requirements for DGR status of donations?

In 2016 the Senate Standing Committee on the Environment conducted an enquiry on this issue. The committee’s report concluded that the purpose of granting DGR status should be to support practical environmental work in the community but then took a very narrow interpretation of the meaning of ‘practical’ and recommended that:

annual expenditure on environmental work be no less than 25% of the organisation’s annual expenditure from its public fund.

Treasury has released a Discussion Paper on this issue and the general administration processes for charities. Currently there is overlap and some confusion between reporting and responsibilities under the Charities and Not-for-profits Commission and the Register of Environmental Organisations. Resolving these issues is welcome but they are also proposing that eligibility should be based on the amount of remediation work carried out.

Why single out the environment organisations for what is basically a financial penalty compared with other charities and lobby groups?

The Discussion Paper states that:

DGR tax arrangements are intended to encourage philanthropy and provide support for the not-for-profit (NFP) sector. Along with other tax concessions to the NFP sector, DGR status encourages the delivery of goods and services that are of public benefit.

It asks for ‘stakeholder views’ on the recommendations of the parliamentary committee, and also whether the government should go even further:

Views are sought on requiring environmental organisations to commit no less than 25% of their annual expenditure from their public fund to environmental remediation, and whether a higher limit, such as 50%, should be considered?

We ask the question, is the revenue forgone in providing tax deductions to environment groups a cost or a benefit? It is more cost effective to prevent damage to the environment in the first place rather than clean up the mess afterwards.

Activities like research, education and monitoring are vital for the prevention of damage. Take as an example the recent ABC program on Four Corners of illegal dumping of construction waste next to the Hunter River discovered by the Community Environment Network on the Central Coast. They were doing the job for the Environment Protection Authority. How much would the clean-up cost if dumping continued unabated? This monitoring would not count as remediation.

Donations and their tax deductibility are especially valuable for organisations like the Environmental Defenders Offices that provide a vital means for the general public to receive advice of their rights when threatened by developments.

Often it is the people living near the development site or mine who are aware of the potential damage not the government bodies. Take the coal seam gas exploration operations as an example, local farmers had no way of obtaining the scientific analysis to be able to object to miners entering their land. Ultimately when the full picture of potential groundwater pollution became clearer the NSW government had to take steps to limit the powers of miners to explore.

Business lobby groups like the NSW Minerals Council are actively supporting the limitation on deductibility status on the grounds that groups like Lock the Gate are simply activists ‘destroying the economy’.

If the proposal goes ahead it will demonstrate that the financial clout and expert lobbying teams of business interests are more important than the views and wellbeing of individual citizens who are concerned about the environment or are adversely affected by a development.

Submissions are now closed but STEP found out about the paper in time to make a submission. It is not too late to send a protest to your local member of federal parliament.