Company Directors on NFP Tax Issues
11 June 2015 at 11:54 am
The Australian Institute of Company Directors has made a submission to the Tax White Paper Task Force with a focus on the taxation arrangements in the Not for Profit sector as well as a recommendation to extend the ACNC framework.
The AICD submission calls for a simple, efficient and understandable tax regime that will support good governance in the NFP sector.
The submission said the current taxation arrangements, while they support the NFP sector, could be improved.
“There are currently some hundreds of thousands of NFP directors in Australia. These directors range from experienced non-executive directors to individuals with relatively little or no experience as a director,” the submission said.
“Regardless of their experience or backgrounds, most NFP directors serve on a voluntary basis. Unfortunately, the complexity of the taxation arrangements for NFPs imposes a burden of time and cost on directors and their organisations alike, and the assistance of legal and tax advisers is commonly necessary to ensure compliance.
“We note that if one of the policy drivers for tax reform is efficiency then Federal taxation is only one issue to be considered. State taxes and duties also add to the complexity for the sector.
“The ACNC has been effective in providing regulatory oversight for the charities sector. We believe this could be enhanced if the to capture all NFPs, not just charities, as per its original intent.”
The submission said tax concession arrangements could be simplified at a State and Federal level for charities by removing the existing Fringe Benefits Tax (FBT) concessions and ensuring that there is an alternative benefit immediately in place, supported by appropriate transition arrangements.
“The Tax Discussion Paper provides an important opportunity for the Government to enhance the effectiveness of the tax regime for NFPs, assisting the efficiency of NFP organisations and in turn, supporting the Government’s own long term bottom line,” it said.
The submission said that as an alternative to the complex FBT regime, the income tax exempt thresholds could be increased for employees who work for, and gain their main source of income from, an employer that is a charity registered with the Australian Charities and Not-for-profits Commission (ACNC).
The AICD that as Deductible Gift Recipient (DGR) status encourages giving it should be retained, however the system could benefit from simplification.
“We recommend the Government focus on encouraging competition within the NFP sector, rather than debating whether NFPs have a competitive advantage over for-profit businesses,” the submission said.
“We strongly support the changes proposed to the taxation laws that apply to employee share schemes; and Section 8Y of the Taxation Administration Act 1953 should be amended to restore the presumption of innocence for directors.”
The submission said the AICD is dedicated to excellence in corporate governance across all sectors of the economy, including the NFP sector.
Download the Paper HERE