A handout detailing the non profit articles that had gone out in via the Non Profit news service since the last meeting was provided during the meeting.
August 2010
No. 0293 - Fuel tax credits affected by recent changes to GST law
There have been a number of changes to GST law which came into effect on 1 July 2010. Some of these apply to claims for fuel tax credits even if you are not required to be registered for GST.
Changes to tax invoices
Information requirements for tax invoices have been relaxed from 1 July 2010.
If you claim fuel tax credits, the information required for a tax invoice does not have to be contained in a single document. More than one document issued by the same supplier may constitute the tax invoice where the combination of documents contains all of the required information. The supplier needs to make it clear on the main document that it is intended to be a tax invoice.
If you are registered for GST and make taxable supplies and issue tax invoices which comply with previous ATO guidelines, changes to accounting systems and software will not be necessary.
More information is available in Changes to tax invoices and recipient created tax invoices - frequently asked questions.
Fuel tax credit claims
If you are registered for GST, you should claim any outstanding fuel tax credit within four years of the end of the tax period to which it applies. You can do this using your current business activity statement (BAS) rather than by revising an earlier BAS that relates to the date of the tax invoice.
If you are not registered for GST and not required to be registered for GST, you should claim any outstanding fuel tax credits within four years of the date when you were required to give the ATO your fuel tax credit claim form.
No. 0294 - Donations to help flood victims in Pakistan
From 28 July 2010, flash floods following torrential monsoonal rains in northwest Pakistan have caused widespread casualties and damage. Appeals have been launched to help victims of the disaster by collecting donations to support relief operations.
If your organisation wants to set up a tax deductible fund to collect donations for use outside Australia, it may be easier and quicker for you to arrange with one of the larger and already approved funds to collect money on their behalf. If your organisation collects donations on behalf of another organisation, remember to comply with state and territory government collections acts.
Donations to an appeal are tax deductible if the organisation operating the appeal is endorsed as a deductible gift recipient (DGR) and is an overseas aid fund. You can check whether an organisation is a DGR on the Australian Business Register.
Information about non-government organisations that operate tax deductible overseas aid funds is also available on the AusAID website.
If you are an employer, you may collect donations from your employees on behalf of a DGR through a workplace giving program or under a salary sacrifice arrangement. Donations made to DGRs under a salary sacrifice arrangement are not subject to fringe benefits tax.
Your organisation may arrange with an approved overseas aid fund to hold a fundraising event on their behalf. Sales made in connection with this fundraising event may be input taxed. Goods and services tax (GST) is not included in the price of input taxed sales and the approved overseas aid fund cannot claim any GST credits for things purchased in making those sales. For GST purposes, a fundraising event is any of the following events:
- a fete, ball, gala show, dinner, performance or similar event
- an event where goods other than alcoholic beverages or tobacco products are sold - provided that each sale is for $20 or less
- an event that we have approved as a fundraising event.
For more information about making tax deductible donations, collecting on behalf of a DGR and related issues, refer to Assisting victims of disasters.
No. 0295 - Recent case: Wentworth District Capital Ltd
On 13 August 2010, Justice Perram handed down the decision in Wentworth District Capital Ltd v. Commissioner of Taxation [2010] FCA 862. The case concerned the issue of whether Wentworth District Capital Ltd was established for a community service under item 2.1 of section 50-1 ITAA 1997. Justice Perram held that in 2006 and 2007 Wentworth District Capital Ltd was established for community services purposes and the income was therefore exempt.
We are currently considering the implications of the decision. We will be providing further advice when the consequences of the decision have been considered.
September 2010
No. 0296 - Donations of property and vendor finance
The ATO advises that donors take care if considering making a donation of property purchased by instalment contract or vendor finance; in particular where the vendor financing involves long term low or no interest loans.
For a donor to claim a deduction for a gift, there are several requirements:
- the gift must be made to a deductible gift recipient (DGR)
- the payment must really be a gift
- the gift must be of money or property that is covered by one of the deductible gift types, and
- any gift conditions must be satisfied.
There are also several requirements to be a gift, the most essential of which is that there has to be a transfer of money or property. If money or property has not been transferred to a DGR or if the 'donor' does not own the item being transferred, that person may not claim a tax deduction for a gift. Before making a gift of property, donors should always check that they own the property. For example, under some vendor finance purchase agreements the buyer is not the owner of the property until the final payment is made.
Property has a wide meaning for gift purposes. As well as physical things, it includes rights and interests that are capable of ownership and have a value. For property (other than trading stock and certain public shares) purchased during the 12 months before donating it, the amount the donor may claim is the lesser of:
- the market value of the property on the day the gift was made, and
- the amount the donor paid for the property.
Whether the market value of the property on the day the gift was made is above or below the amount paid for the property is a matter of fact. It is up to the donor, not the DGR or the vendor, to find out the market value of the gift. Donors should seek advice if concerned about the amount that can be claimed, if payment instalments fall due over an extended period, or if vendor finance is offered at low or no interest rates over an extended period.
There is no gift deduction where a person enters into an arrangement in relation to the making of a gift and:
- the value of the gift to the DGR is, or would be expected to be, less than the value of the gift at the time the gift was made
- any other organisation makes, or may reasonably be expected to make, payments to other persons in relation to the gift
- the donor or an associate obtains, or would be expected to obtain, any benefit other than the benefit of a tax saving, or
- the DGR or another fund, authority or institution is to acquire property from the donor or an associate.
For more information about market valuations, see Market valuation for tax purposes. It covers real property, plant and equipment, businesses, securities and intangible assets. Some deductible gift types have special valuation rules. These are explained in Making tax deductible gifts and contributions.
For more information about deductible gifts, refer to Making tax deductible gifts and contributions. It covers a number of topics including:
- deductions for gifts of property valued by the ATO at more than $5,000
- capital gains and other consequences of making gifts, and
- record keeping requirements.
No. 0297 - Support for victims of recent Christchurch earthquake
The Assistant Treasurer has issued a declaration to recognise the recent earthquake in Christchurch as a disaster for the purposes of tax deductibility of donations.
Organisations wishing to establish a tax deductible fund to assist victims should refer to: Developed country disaster relief funds.
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Organisations seeking endorsement as a 'developed country disaster relief fund' must apply to us.
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An extract from the Assistant Treasurer's media release No. 0158 dated 9 September 2010 is below. The full media release can be viewed on the Assistant Treasurer's website.
Declaration to boost disaster relief effort for the Christchurch earthquake
The Assistant Treasurer announced the earthquake that hit New Zealand's second largest city last Saturday has been recognised as a disaster for Australian tax purposes.
'I know Australians will want to help out the people of Christchurch, and allowing a tax deduction for their gifts is an appropriate way of boosting the relief drive,' the Assistant Treasurer said.
The Assistant Treasurer's declaration means public funds established and maintained by a public benevolent institution solely to provide money for the relief of people in New Zealand who are in distress as a result of the Christchurch earthquake can be endorsed as 'developed country relief funds'. Donations to such funds are tax deductible for a period of two years from 4 September 2010. Taxpayers should ensure they retain a receipt for their donation.
October 2010
There are no news articles for October 2010 (as at 29 October 2010).
Three items were discussed during the meeting:
1. No.0297 - Support for victims of recent Christchurch earthquake.
There was a query about whether there is a need to set up a new tax-deductible donations fund for each disastrous event or whether a fund established for an earlier event can be used for a similar situation?
It was confirmed that a new fund must be set up for each event in a developed country following the formal recognition by a Treasury Minister of the disaster. The recognition of the disaster and processing of any fund applications are generally made in a timely manner.
Donations to an appeal for a disaster in a developing country are tax deductible if the organisation operating the appeal is endorsed as a DGR and is an overseas aid fund.
2. No. 0295 - Wentworth District Capital Ltd.
Wentworth District Capital Ltd's local banking activities were judged to have been established for community services purposes. The Commissioner has appealed the court decision.
The Word decision is increasingly encouraging endorsed organisations to consider whether they have commercial opportunities for income generation.
3. No. 0296 - Donations of property and vendor finance
The ATO has advised that donors take care if considering donating property purchased by instalment contract or vendor finance; in particular, where the vendor financing involves long term low or no interest loans.
Recently some donors have found that a scheme involving long-term loans to allow a donation did not provide the 'promised' tax deduction.
Sections within Agenda items
Last Modified: Thursday, 13 January 2011