Call for Tax Concessions for Impact Investments
1 July 2015 at 10:39 am
Social Ventures Australia (SVA) has called for tax concessions for impact investments in social enterprise, social impact bonds and social and affordable housing projects, in a submission to the Federal Government’s Tax White Paper Process.
The submission said current tax arrangements favour charitable Not for Profit organisations, particularly those that have Deductible Gift Recipient (DGR) status.
“Organisations that deliver similar if not the same services under a social enterprise or social impact bond structure benefit from few such exemptions despite often operating in a more sustainable manner,” the submission said.
The SVA submission suggests there are two main opportunities for tax policy change in this area:
1. Investors should be able to offset the amount invested in a social enterprise or social impact bond against their assessable taxable income in the year that the investment is made, as well as enjoy a tax exemption for interest re-payments or dividends as they are repaid during the life of the investment. Capital gains tax should also be exempt when the impact investment is held for a minimum period.
2. A new social infrastructure tax offset scheme should be implemented using non-deductible/non-assessable social and affordable housing bonds so that investors can lend at sub-market rates to developers building new social and affordable housing stock.
“Social enterprises like all businesses require access to capital to operate and grow,” Executive Director of Impact Investing at SVA, Ian Learmonth said.
“Tax offsets could play a central role in encouraging investors to invest in enterprises and other social impact projects with social benefits that are expected to considerably outweigh the tax revenue that may be forgone by the Government through the new arrangements.
“Government savings can include reduced welfare payments and reductions in Government expenditure in areas such as corrective services, emergency hospital and policing costs.”
Learmonth said that in the UK and US similar initiatives have been credited with generating significant new investments in social initiatives and disadvantaged communities.
Social Ventures Australia offers funding, investment and advice to increase social impact. The Not for Profit organisation was established in 2002 by The Benevolent Society, The Smith Family, WorkVentures and AMP Foundation.
The Federal Government’s discussion paper on tax reform was released in March 2015 and specifically targeted the Not for Profit sector asking if the current tax arrangements are appropriate – raising issues around the ongoing availability of Fringe Benefits Tax concessions and other foregone tax revenue.
The White Paper, entitled Re:think, Better tax, Better Australia, includes a separate section on the Not for Profit sector said that while existing tax concessions help increase the level of activity in the NFP sector, the value of revenue forgone from the concessions is significant and growing steadily.
The Governnent received more than 400 submissions.
The submission can be found HERE