Charity Inquiry -Australian Tax Office Submission

The Inquiry into the Definition of Charities has been granted a three-month extension of time to consider some 350 submissions. The Treasurer has given the inquiry until 30 June 2001 to complete its report. And in this edition we look at another one of those submissions – from the Australian Tax Office.

The ATO has made an extensive submission to the Inquiry saying from the outset that it does not advocate any particular approaches on what definitions ought to be.

However it points out that there are significant difficulties with the present system.

In the submission’s covering letter, the ATO Second Commissioner Michael D’Ascenzo says it is the ATO’s view that no matter what the source of definitions used (common law, statutory or a combination), there will be a continuing need for the making of fine definitions.

In the detailed submission the ATO says that the continued provision of tax concessions in the current manner will always see organisations getting different treatment from both the Tax Office and the courts.

D’Ascenzo says this presents many issues that are both difficult and politically sensitive.

He adds that many of the problems the ATO sees are virtually without solution.

Mr. D’Ascenzo says the current system of tax concessions provides an unnecessary layer of administrative cost and complexity and lacks transparency.

And accordingly, he says, the ATO would favour a single targeted, transparent and accountable program of direct outlays and such outlays could even include a refund of paid tax.

The ATO says that administration would be better served by a single, independent common point of decision making on definitions leading to conclusions about whether organisations are charitable or non-profit, such as occurs with the Charities Commission in the U.K.

The submission says that independent, objective decision making could then serve as the criterion determining the level of funding and/or concession to which an organisation would be entitled.

The submission goes into some detail about the issues and problems of tax concessions that apply to organisations within the scope of the inquiry.

The Tax Office says some of the possible approaches to addressing these problems include:
 Limiting special treatment of concessionally taxed organisations to the particular activities they carry out
 Providing special treatment only for the particular sorts of activities and not because of the character of the organisation and
 Treating the unrelated businesses of concessionally taxed organisations separately.

To find out more about the Inquiry go to www.cdi.gov.au or join the discussion about the Inquiry on our Forum page.