Tax Concession Paper Needs Careful Consideration
8 November 2012 at 8:28 am
OPINION: The recently published NFP Sector Tax Concessions Working Paper poses 51 questions that require careful consideration, and the "ATO clearing house" option for tax-deductible gifts is disturbing in that it suggests to me that the authors did not check the full ramifications of their proposed solution with practising fundraisers.
Option 2.7 in the latest Consultation Paper issued by the NFP Sector Tax Concession Working Group on 2 November 2012 poses some interesting questions about how such a scheme would work.
The option proposes an online donation facility within the ACNC's on-line Register that would enable donors to make a tax-deductible gift to the charity of their choice. The ATO would provide the receipt to the donor and remit the funds to the charity. What is not clear is whether this would be the only avenue for donors to make tax-deductible donations or whether this would be an optional avenue for tax-deductible gifts.
I ask just a few questions to illustrate my point:
- Will this be the only approved means of making a tax-deductible gift, or just an on-line option for donors?
- Will the identity of the donors who choose to use this "ATO Clearing House" be passed on to the charity? What does this mean for the way in which donors are thanked?
- Will the ATO issue only general purpose donation receipts or will they also acknowledge special purpose receipts in circumstances where the donor wants their gift to support a particular aspect of the work of the charity? How will this information be transmitted to the charity?
- Will this facility have "friend-sponsor-a-friend" or "team" fundraising capabilities?
- Will the information about the sources or "triggers" of the donation be captured and will this vital information be passed to the charity by the ATO?
- How will the data from the ATO "clearing house" be integrated with the many different operating systems used by fundraising databases operated by charities?
- What impact might such a scheme have on the personal relationship between donors and the charities they support?
- What impact will such a scheme have on levels of giving in Australia?
Did the parties proposing this option obtain any expert advice from practising fundraisers on whether such a scheme would be viable? Or was it just a discussion starter?
Here’s an extract from the Discussion Paper issued by the NFP Sector Tax Concession Working Group
"Option 2.7: Creating a clearing house for donations to DGRs
- The ACNC is likely to begin operations in late 2012. It will register charities and maintain the Australian Charities and Not?for?profits Register (ACN register). The ACN register may contain standard information set for all registered entities including a description of their purposes, activities and, typically, at a minimum, high level financial information.
- A clearing house for gifts to DGR entities which is linked to the ACN register could promote and encourage charitable giving. Individual taxpayers could use the register to search for particular types of DGR to support. Individuals could donate to these DGRs through the clearing house website.
- An advantage of this option is that individual taxpayers would be able to use one website to access information on all registered charities, helping them make informed choices. Currently, information on purposes and activities of DGRs is scattered across different sources, and in some cases, may not be available, particularly for smaller charities. The clearing house would simplify making cash gifts to DGRs and would provide a reliable mechanism for individual taxpayers to make credit card donations to one or more DGRs in a single secure transaction.
- Cash donations would be deposited into the bank accounts of charities by the ATO which would maintain the clearing house. The clearing house could automatically create electronic donation receipts and if desired, pre?fill electronic tax returns. Taxpayers could access the clearing house website for details of their deductible cash gifts during a financial year. This would reduce the compliance and administrative costs of DGRs as, subject to any applicable State and Territory law requirements, they would no longer have to issue donation receipts.
- Smaller charities are likely to have limited or no online fundraising facilities, and are therefore likely to benefit from this option.
- Establishing a clearing house has an estimated once?off capital cost of around $25 million. This does not include ongoing costs, such as credit card charges, which it may be possible to eliminate through support from financial institutions.
- A further benefit of a clearing house is that it may assist increased donations through workplace giving. This option would facilitate workplace giving by providing employees and employers with a central website to donate to DGRs. Workplace giving allows better planning of giving by more closely aligning donations and cash flow patterns, and allows individuals to donate in a more considered manner.
- The PC noted that around 0.6 per cent of all adults in Australia participated in workplace giving, compared to 1.3 per cent in the UK, and 5.6 per cent in Canada.
- A clearing house linked to the ACN register would help to reassure donors that all monies donated through the clearing house will go to registered charities. It would also provide donors with a comprehensive list of potential DGR entities they would be able to confidently donate to.
The discussion paper is available for download from the Treasury website.
About the author: Brisbane-based fundraising expert Dr Ted Flack is a long-time fundraising regulation reform activist.