Govt Consultation on Revised NFP Tax Conditions

The Coalition Government has begun community consultations on draft legislation and regulations on the special conditions for tax concessions for Not for Profits and charities including the “in Australia” condition.

The Federal Treasury says the draft measures amend the tax law to restate and centralise the special conditions for tax concession entities by:

• re-stating the “in Australia” special conditions for income tax exempt entities, ensuring that they generally must be operated principally in Australia and for the broad benefit of the Australian community (with some exceptions);

• centralising and simplifying in one place the other special conditions entities must meet to be income tax exempt, such as complying with all the substantive requirements in their governing rules; and

• codifying the "in Australia" special conditions for deductible gift recipients ensuring that they must generally operate solely in Australia, and pursue their purposes solely in Australia (with some exceptions, such as overseas aid funds, some environmental organisations, some touring arts organisations and medical research institutes).

The Government says it has made improvements to the exposure draft to address concerns raised by the Not for Profit sector with the former Labor Government's Bill (Tax Laws Amendment (Special Conditions for Not for Profit Concessions) Bill 2012).

NFP peak body, the Community Council for Australia says it will be reviewing the changes made to the legislation and preparing a submission in consultation with its community members.

“This is an important piece of legislation mainly because it had threatened the viability of some of the funds and special trusts set up to support the overseas activities of largely Australian based charities,” CCA CEO David Crosbie said.

“Many organisations involved in work overseas establish such funds so donors can choose to support or not to support that particular overseas activity, but if the fund to support overseas activity is to offer tax deductibility to donors, it needs to operate mainly in Australia or satisfy the exemption categories in this proposed legislation.

“In practice this legislation was developed to ensure Australian tax concessions are provided only to organisations operating primarily in Australia, with exceptions for international development organisations registered separately with the government, and a number of other exemptions mainly to address the concerns of touring arts organisations.”

He said the legislation was seen as part of Australia’s international obligation to make it more difficult for terrorists to use Australian-based charities or Not for Profits as fronts to raise money for their activities overseas.

Not for Profit Legal Service Justice Connect says it will also be making a submission to the consultation.

“Not-for-profit Law supports any measure designed to improve consistency and clarity of laws relating to charitable tax concessions,” Acting Director of Not-for-profit Law at Justice Connect, Nathan MacDonald, said.

“That said, we will be examining the latest Exposure Draft to ensure the new proposals will not create uncertainty for charities or impose additional restrictions on the Not for Profit sector without a robust policy justification.”

To comment on the Tax and Superannuation Laws Amendment (2014 Measures No. #) Bill 2014: Restating and centralising the special conditions for tax concession entities and the associated explanatory material, click here.

Closing date for submissions is Monday, April 7.