Not-for-profit Stewardship Group key messages 11 November 2020

Welcome and introduction

Members were welcomed and an acknowledgement of country was given.

Apologies included:

• Tim Dyce, Deputy Commissioner Private Wealth, NFP Client Experience Owner, ATO
• Anne Robinson – Jae Yang, Prolegis is joining us today as a proxy
• Judy Sullivan, Principal Solicitor, Judy Sullivan Consulting.

No conflicts of interest were declared.

Administration

• Record of meeting minutes were published on 22 October 2020.
• Action items – All items are closed.
• An overview of the communications issued to members since July was provided, including:
  • sharing the ATO Corporate Plan in August and a 2020-21 budget update in October
  • recent updates on the Tax Gap estimates and overview of PAYG instalments and company tax rate
  • broadcast emails to keep members up to date on JobKeeper, new or changed COVID-19 web content, participation in digital program testing or research, implementation of new deductible gift recipients (DGRs) category for Community Sheds and the opening of public consultation on the proposed legislation that will require all DGRs to register as charities. 
   

Technical updates

Taxation Ruling TR 97/22 Income tax: exempt sporting clubs

Assistant Commissioner Justin Dearness and Tax Counsel Network Specialist John Churchill from the ATO provided an update. Key points included:

• As at 11 November 2020, details were updated on ato.gov.au to notify the community that consultation resumed in October, following a pause in response to COVID 19.
• The working group of the Not-for-profit Stewardship Group (NFPSG) reconvened to progress the development of a refreshed consultation document. The intent is for this document to form the basis for the content to refresh Taxation Ruling TR 97/22. The new content will provide practical examples and clear guidance for not-for-profits who seek income tax exemption due to having a main purpose of encouraging a game or sport.
• A meeting was held in the week commencing 2 November, with a consultation document distributed to the working group that included draft examples. Further meetings are being arranged with the working group with the aim to release a draft ruling in the first half of 2021.
• Any questions can be directed to ATO Director, Melinda Knight.

Goods and Services Tax Ruling GSTR 2012/2 Goods and services tax: financial assistance payments

Assistant Commissioner Jennifer Moltisanti provided an update on the GST on Grants Ruling.

Members of the NFPSG have previously expressed concerns that the guidance provided by the ATO regarding the GST treatment of grants of financial assistance is not sufficiently clear for entities to determine whether GST is payable by the recipient of a grant of financial assistance. At the July 2020 NFPSG meeting a working group was formed, however this work did not progress due to COVID-19 related priorities. Key points include:

• Initial timelines have been impacted by the response to COVID-19.
• A working group is intended to come together before the end of the 2020 to work on feedback received from State and Territory governments, validate these issues and set a trajectory for 2021.
• The ATO’s view is not being questioned. There is however sufficient feedback that highlights an opportunity for clearer examples to be provided in the ruling, so that clients can better understand how to apply the law for their particular circumstances.

Update as at 18 December 2020

The work to review the guidance and examples on GST on grants provided in Goods and Services Tax Ruling GSTR 2012/2 will commence early in the new year. The following indicative timeline provides an outline of next steps.

• Late January 2021 – NFP Centre will meet with ATO internal stakeholders (GST Technical Leadership and Advice) to consider concerns previously raised by NFPSG members
• Early February 2021 – Engage the NFP working group created to validate issues and seek further clarification
• Agree next steps, possible outcomes and timeframes. This may include an agreement to clarify the ATO view with examples in our web content.

Current or emerging issues

The Co-chair John McIntosh thanked the group for the ongoing engagement of the group, with members providing notification of emerging issues in the community in real time.

The question was asked if the ATO may release updated JobKeeper payment scheme figures to better understand the level of support provided to the not-for-profit sector. The ATO noted the latest available data was published 27 September 2020 and will forward the latest figures out of session.

Action item	NFPSG 21-20
Due date	18 November 2020
Responsibility	ATO Assistant Commissioner, Jennifer Moltisanti
Description	JobKeeper statistics for Not-for-profit entities   Provide most recent JobKeeper statistics with Not-for-profit breakdown, last published 27 September 2020, to group.

Phil Butler from the Australian Institute of Company Directors provided a brief overview on the Australian Institute of Company Directors’ NFP Governance and Performance Report circulated in November. It outlines the impact of COVID-19 on the financial wellbeing of the sector. The observations made include:

• Many organisations that struggled before the onset of COVID-19 then observed an ongoing drop in profitability. Some of these sub-sectors included aged care, sports and recreation, and culture.
• Many organisations have needed to tap into reserves that they had built over a number of years. Organisations with more of a buffer had been better placed for navigating COVID-19 than those with fewer reserves.
• There is opportunity to explore these types of impacts upon the sector, including the level of balance sheet reserves an NFP may consider to better position for the future, as these issues are likely to be ongoing for many years to come.

A member suggested that the information on the Register of Harm Prevention Charities website requires an update to reflect the ATO view of the ‘In Australia’ condition. ATO Director, Melinda Knight, confirmed that the Department of Social Services is the administrator of the register. They have been in contact with the ATO and are in the process of updating guidelines and web content.

Action item	NFPSG 22-20
Due date	25 November 2020
Responsibility	ATO Director, Melinda Knight
Description	In Australia Condition (TR2019/6) and Harm Prevention Guide   Current Harm Prevention Guide does not reflect the updated ATO view on the In Australia condition as per Taxation ruling TR 2019/6.   Follow up with Department of Social Services to ensure they are aware of the updated view and when the guide will be updated.

It was noted that some government departments have asked several charities to disclose the JobKeeper payments received for employees who are fully funded by government grants. This can be challenging for not-for-profits who deliver multiple programs that may be partly self-funded. There is a perception that government departments may then adjust funding that is linked to JobKeeper.

A member advised that they had received JobKeeper up until the current quarter and it had served as a lifeline for them and a number of their member organisations – in particular, due to a significantly reduced level of funding opportunities for the not-for-profits that do not directly provide a COVID-19 recovery service.

The question was raised about if the Australian Charities and Not-for-profit Commission (ACNC) has a provision to pause a revocation of charity registration, in the event that a charity appeals an ACNC revocation decision and the matter is yet to be heard or finalised.

• ACNC advised that registration is revoked at the point of decision. If a charity appeals and it is successful, then the registration is reinstated.
• It was noted that there may be broader consequences for a charity when they are de-registered, such as impacts to their employees and access to tax concessions.
• Members observed that consideration also needs to be given to the length of time it takes for an appeal decision to be received. There can be other implications for the sector if a charity continues to be registered during an appeal.

Action item	NFPSG 23-20
Due date	December 2020
Responsibility	ACNC Assistant Commissioner, Anna Longley
Description	Charity registration/revocation objections   Out of session discussion to be held between ATO and ACNC to discuss charity registration/revocation objections and impact on the charities whilst waiting for an outcome, including taxation legislation administered by the Commissioner.

The culture of giving in Australia

Sarah Wickham from Philanthropy Australia presented an outline of how they are working with philanthropic, not-for-profit and government sectors, to identify opportunities that better incentivise, promote and nurture more planned or structured giving in Australia over the next 10 years.

There are several key focus areas being considered, including:

• What is enabling or stopping people from giving now? Are there blockages to Australia’s culture of giving?
• What are the structures and rules within Australia’s charitable sector that are enabling and hampering giving?
• Looking toward the future – are there new ideas that may incentivise giving?
• How do we grow a movement across the country for structured or planned giving?
• Should there be a focus on certain sectors and industries, to affect the most significant change?

Philanthropy Australia appealed to interested NFPSG members to join a virtual session in late November or December:

• for more detail on the research undertaken to date
• to contribute their expertise on the emerging strategy and to help unpack issues and opportunities.

NFPSG members to email Sarah Wickham, or the NFP Secretariat, with interest in joining a Philanthropy Australia hosted virtual session on Growing structured giving in Australia.

Members’ comments

• The Workplace Giving program has a lower take-up, in comparison with other jurisdictions. This may be due to a lack of awareness. Can more be achieved with framework we already have, and how can we better engage the private sector?
• A key element is an opt-in system in Australia, in comparison to other jurisdictions which apply an opt-out system.
• Participation in Workplace Giving programs is largely driven by staff engagement with specific charities, at either the local or national level. Some may encourage giving by the company matching contributions, but this is often contingent on an individual staff member having a relationship with a specific charity or cause.
• Workplace giving programs work for charities that are bigger, well known, or deliver a particular support or focus. Organisations such as the Australian Federation of Disability Organisations provide a voice for people with disability through national systemic advocacy. As they may not deliver direct services and support of a particular focus, it can find it difficult to make headway for donations in direct comparison to others.

ACNC update

Assistant Commissioner Anna Longley, General Counsel, ACNC, provided the following update.

• From 1 November the ACNC have started their review of charities with DGR status, applying a risk-based approach and framework.
  • ACNC guidance is available, including check sheets and toolkits, to support and encourage charities to undertake a self-review.
  • DGR endorsed charities should take this opportunity to review their registration and confirm it is consistent with a charitable purpose.
  • The ACNC expects to commence contact with individual DGR endorsed charities in 2021 only where issues cannot be resolved through the desktop review. 
   
• ACNC have been working with States and Territories to achieve Red Tape Reduction reforms, including
  • Working with Western Australia to streamline reporting – whereby Incorporated Associations only need to report to the ACNC from the 2020 Annual Information Statement (AIS) and do not need to provide a separate return to Consumer Protection. The ACNC collects the information required by Consumer Protection once, and transfers it to them so the client needs to only lodge one form.
  • Implementing a new arrangement with Consumer Affairs Victoria (CAV), so that newly registered charities access a streamlined registration process to notify of their intention to fundraise via myCAV. While a charity maintains registration with the ACNC and notifies CAV of this, it will not need to renew its fundraising registration. Charities can also submit just the one AIS to the ACNC, and will not be required to submit a separate annual statement to CAV. 
   
• Transitional reporting relief is available for New South Wales, Victorian and Northern Territory Incorporated Associations.
• There are deferred reporting due dates to note for AIS
  • The 2020 AIS for single charities is deferred from 31 December 2020 to 31 January 2021.
  • The 2020 Group AIS with due dates between 31 December 2020 and 30 March 2021, is deferred to 31 March 2021. 
   
• The ACNC has extended the compliance approach implemented in response to COVID-19, which was previously due to end on 25 September 2020. The approach applies to certain breaches of Governance Standards and the External Conduct Standards that occur from 25 March until 31 December 2020.
• The ACNC has eased some insolvency requirements to align their approach with the relief available under the Corporations Act.

Members' comments

One member queried if there has been any movement on the Commissioners Interpretive Statements and if a further submission may be considered.

• ACNC Assistant Commissioner Anna Longley advised there were a significant number of submissions received, with some highlighting a need for a refresh and use of more contemporary language and examples. Progress updates would likely not be available until 2021.
• The ACNC may consider a further submission if it is provided soon.

Treasury update

Jacky Rowbotham Principal Adviser, Treasury provided the Treasury update.

• Treasury is seeking submissions on the draft bill and explanatory memorandum that will require DGRs to register as charities. Public consultation is open 12 October to 4 December 2020.
  • The reform was announced as part of the 2017–18 Mid-Year Economic and Fiscal Outlook measure.
  • Since the announcement, a number of changes are proposed including
    • non-charity DGRs will not be automatically registered as charities
    • a transitional period to register as a charity will be available
    • a provision for DGRs to apply for a time limited exemption to register as a charity, provided they have taken steps to register but require more time to meet the requirements. 
     
  • The ACNC and ATO will work together during a 12-month registration period for smooth processing of applications.
  • The enactment of the legislation is set to be three months after Royal Assent. 
   
• New South Wales has led a work with other States and Territories to harmonise charitable fundraising laws.
  • A public consultation on a proposed a cross-border recognition model and streamlining the notification process, was held between 31 August to 18 September 2020.
  • Submissions are being reviewed by Commonwealth, State and Territory Ministers. It is expected an update may be available for the next NFPSG meeting in March 2021. 
   

Members’ comments

An update was requested on the implementation of recommendations in the Government Response to the ACNC Review released in March 2020.

• Treasury advised that work recommenced in July, after a pause due to COVID-19 responses. The ATO is working with Treasury to develop potential options that will be submitted for consideration by the Minister.

NFP Centre update

ATO Assistant Commissioner Jennifer Moltisanti provided an overview of work underway in the ATO’s NFP Centre, including:

• sharing the NFP Centre’s purpose, goals and priorities that are outlined in the 2020-21 Not-for-profit Centre and Government Relations Plan
• working with key stakeholders to explore opportunities that will strengthen regulation of registered self-assessing income tax exempt entities
• a research project underway to scope the key characteristics of an estimated 400,000 unregistered not-for-profit entities operating in Australia
• joining as a member of the Swinburne University Research Project which is seeking to gain insights about how
  • Australian not-for-profit entities use the annual report, including the financial statements, to show they are accountable
  • information in the annual report of Australian not-for-profit entities, including the financial statements, is used by external stakeholders. 
   
• consulting the Australian Accounting Standards Board (AASB) regarding the Australian Financial Reporting Framework Project
  • AASB would like to establish a working group to understand the issues, and to validate the issues they are considering.
  • AASB also established an NFP Advisory Panel, of which ATO Assistant Commissioner Jennifer Moltisanti is a member.
  • AASB will consider the interest of NFP Stewardship Group members who would like to join the working group or join the NFP Advisory Panel. Members can forward interest to the ATO.
  • The NFP stream of the project seeks to address matters identified through consultation and research over the years, including to
    • improve consistency and comparability of financial statements of NPF entities
    • make the financial reporting requirements more proportionate. 
     
   
• The ATO will provide an overview of the work of the NFP Centre at the upcoming ACNC Advisory Board Meeting on 13 November. A copy of this flagship presentation will be shared with the group.

Action item	NFPSG 24-20
Due date	December 2020
Responsibility	ATO Assistant Commissioner, Jennifer Moltisanti
Description	Australian Accounting Standards Board (AASB) reporting framework   AASB reporting framework – NFP Project Advisory PanelExternal Link nominations   NFPSG members who would like to join the NFP Project Advisory PanelExternal Link led by the AASB and attended by ATO AC Jennifer Moltisanti to provide their nominations to the ATO.

Other business

Assistant Commissioner Jennifer Moltisanti discussed other business.

Online Services for Business

The ATO is currently running private beta testing for Online Services for Business (OSB), from October 2020 through to early January 2021. OSB will replace the Business Portal and the Electronic Superannuation Audit Tool (eSAT).

Two not-for-profits are already taking part in the private beta testing. It is expected that public beta is likely to be available in early 2021, with the Business Portal decommissioned by end June 2021.

An out-of-session demonstration can be arranged for members who are interested in a walk-through of the Online Services for business platform.

Action item	NFPSG 25-20
Due date	23 December 2020
Responsibility	NFPSG Secretariat
Description	Online Services for Business   NFPSG members who are interested in an out-of-session demonstration of OSB screens, contact the secretariat.

Membership refresh

In line with the NFPSG charter, the NFPSG will be running a part refresh in early 2021. The last refresh was in 2018 – membership is typically for two years across all ATO Stewardship Groups.

The refresh generally involves:

• providing guidelines closer to the refresh date
• issuing an expression of interest email to existing members before commencing a broader call to the sector for nominations
• publishing an NFP Newsroom Article to call for nominations from the NFP community.

A process for co-chair nominations will be run separately.

Effectiveness and contribution of the NFPSG

Members will receive an email from ATO Consultation email address consult@ato.gov.au

The intent is to provide the opportunity for members to provide their views on the effectiveness of the Group in 2020, such as:

• If discussions and outcomes are meeting the intent for the group
• Identify what has worked well or what needs to be changed or improved
• Is the work of the group effectively communicated – if not, are there suggestions for improvement
• The key outcomes achieved in 2020, and what is on the horizon for the year ahead.

Attendees

Attendees list

Organisation	Attendee
ATO	Frances Gobel, Private Wealth
ATO	Jennifer Moltisanti, Private Wealth
ATO	John Churchill, Tax Counsel Network
ATO	Justin Dearness, Tax Counsel Network
ATO	Kathrina Weinhonig (Secretariat), Enterprise Strategy and Design
ATO	Len Hertzman, Tax Counsel Network
ATO	Marisa Hewitt, Private Wealth
ATO	Melinda Knight, Private Wealth
ATO	Prescilla Moses (Secretariat), Private Wealth
ATO	Rowan Fox, Policy, Analysis and Legislation
Arnold Bloch Leibler	Joey Borensztajn
Australian Charities and Not-for-profit Commission	Anna Longley
Australian Federation of Disability Organisations	Ross Joyce
Australian Institute of Company Directors	Phil Butler
Catholic Social Services Australia	Joe Zabar
Clubs Australia	Simon Sawday
Community Council for Australia	David Crosbie
CPA Australia	Ram Subramanian
EY	Amanda Spinks
EY	Sheetal Rajan
Giuntabell	Nunzio Giunta
Justice Connect	Sue Woodward
Law Council of Australia	Jennifer Batrouney
Philanthropy Australia	Sarah Wickham
Prolegis Lawyers	Jae Yang
Swinburne University of Technology	Krystian Seibert
The Salvation Army Australia	John McIntosh (Co-chair)
The Tax Institute	Bridgid Cowling
Treasury	Jacky Rowbotham
University of New South Wales Business School	Fiona Martin

Apologies

Apologies list

Organisation	Member
ATO	Tim Dyce (Co-chair), Private Wealth
Judy Sullivan Consulting	Judy Sullivan
Prolegis Lawyers	Anne Robinson

Information about the key topics discussed at the Not for profit Stewardship Group meeting 11 November 2020.