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  • Not-for-profit Advisory Group minutes 25 March 2015

    Meeting details

    Venue

    Sydney

     

     

    Date

    25 March 2015

     

     

    Start

    10.00am

    Finish

    3.00pm

    Chair

    Tony Poulakis

     

     

    Contact and secretariat

    Gess Sottile

    Phone

    02 6216 2264

    Attendees

    ACNC

    Murray Baird, Assistant Commissioner and General Counsel

    Arts Law Centre

    Robyn Ayres, Executive Director

    Australian Catholic Bishops Conference

    Father Brian Lucas, General Secretary

    Australian Centre for Philanthropy and Nonprofit Studies, QUT

    Prof. Myles McGregor-Lowndes, Director

    Australian Conservation Foundation

    Elizabeth McKinnon, General Counsel

    Herbert Smith Freehills

    John Emerson, Consultant

    Jobs Australia Ltd

    David Thompson AM, CEO and Chair, National Roundtable of Nonprofit Organisations

    Johnson Winter & Slattery, representing Executive Council of Australian Jewry

    Richard Gelski, Partner

    Minter Ellison representing
    The Tax Institute

    Paul Ingram, Partner

    Philanthropy Australia

    Krystian Seibert, Manager Policy & Research

    Salvation Army

    John McIntosh, Charities Tax Advisory Service

    Uniting Care Australia

    Joe Zabar, Director with Uniting Care

    Treasury

    Kirsten Embery, Senior Advisor, Small Business Tax Division

    DSS

    Tim Reddel, Group Manager, Programme Office

    Jennifer Kay, A/g Branch Manager, Programme Service Branch

    ATO

    Tony Poulakis, Assistant Commissioner, PGH, Policy and Corporate Risks

    Rod Walker, Senior Director, PGH NFP Strategy

    Albert Beric, PGH NFP Risk Manager

    Mark Ferguson, PGH NFP Hub

    Gess Sottile, PGH NFP Hub

    Ilana Millar, Assistant Commissioner (Senior Tax Counsel) Tax Counsel Network

    Matthew Petersen, Operations Manager, Interpretive Guidance NFP

    Adhir Singh, Strategic Projects

    Apologies

    Robert Drummond, Assistant Commissioner, Business Reporting and Registrations, Operations

    Next meeting 15 July 2015

    Record of meeting

    Key messages

    • In February 2015 the government signalled that the progress of the repeal of the ACNC bill is a low priority. The ATO and ACNC have since met to identify further collaboration opportunities designed to enhance client support and education and increase NFP sector integrity through effective information sharing and compliance activities addressing high risk behaviour.
    • A program of change called “Reinventing the ATO” continues to be rolled out bringing with it cultural change within the ATO and a focus on improving the client experience. The ATO will organise to consult further with this Group and other representatives of the NFP community on changes coming from the “Reinventing the ATO” program.

    Welcome

    Members were welcomed to the meeting with an opening statement from the ATO.

    Confirm record of previous meeting

    The record of the 12 November 2014 meeting was confirmed and has now been published, see link below.

    12 November 2014 Not-for-Profit Advisory Group meeting 

    NFP perspective presentations

    The Salvation Army and Uniting Care Australia gave presentations about their organisations followed by general discussion.  

    Two issues raised during discussion that the ATO agreed to follow up are:

    • input tax fundraising and limitations on the number of events per annum, see Action Item NFPAG09-15
    • changes that flow from a move to consumer directed care, see summary below of this issue and discussion that followed.

    Consumer directed care

    Over the last 25 years there has been a growing marketisation of social services delivery. The most recent change to affect social service delivery is that of consumer directed care (CDC). The CDC model empowers consumers with choice around the type of care or service they wish to acquire and from whom they purchase it. Moving to this service model means that governments will in effect fund consumers who will in turn purchase a service from a provider.  This model is designed to encourage competition between providers. This model also encourages new entrants, which are primarily from the for-profit sector. The CDC model will change how NFPs provide social/community services as well as the role governments will play in the funding and regulation of those services. To remain viable in this new environment NFPs will need to undertake activities to attract and maintain clients i.e. marketing and promotion activities.  Investment in these activities may lead to smaller organisations struggling to remain viable. While the law may accommodate an NFP undertaking these self-promotion activities it will likely generate a negative public perception as NFPs may appear to be operating like ‘for profit’ businesses. This may have further effects on the ability to attract and retain volunteers. The Government is currently considering the Harper review of competition lawExternal Link and its response to some the report’s recommendations will be important for the NFP sector.

    Discussion

    Members noted that:

    • the consumer directed care issue could be fed into the government’s tax white paper process
    • consumer directed care is an issue of concern across the whole of the NFP sector
    • it is important that the ATO is proactive in considering what these changes mean for NFPs and their tax concession status
    • it is important for policy agencies e.g. Treasury and DSS to understand whether the changes will require policy rethink.

    Action items

    Action items from previous meetings have been completed. Action items from this meeting are listed at the end of the meeting notes.

    Treasury update

    In Australia’: no update as yet from government about this measure. This uncertainty continues to be of concern to members, see more discussion under the law update.

    Miscellaneous amendments exposure draft: working group met to discuss this and a number of issues were raised. Treasury has made recommendations to the Minister and expects that there will be another draft of the bill, which is expected to be a Winter T bill. Treasury will consult with this Group before finalising the bill.

    Ancillary funds: there is a measure in the next ‘Repeal Day’ bill in relation to what PAFs do when they wind up. Changes are also proposed for the Guidelines. Treasury intends to consult on the changes and the consultation will at the very least include this Group and perhaps other targeted groups. The timing is not yet known but could be June 2015.

    Members asked if changes are proposed to the limitations placed on private ancillary funds distributing to ‘non-qualifying’ deductible gift recipients. The point was made that these limitations should not be necessary as for the most part funds do the right thing. It was suggested that this issue could be addressed by changes to the Guidelines.

    White paper: the discussion paper includes a chapter on NFPs, although the scope of the paper does not extend to options and solutions. Treasury encouraged members to make submissions to and to raise issues.

    Special conditions: some members expressed the strong opinion that the special conditions relating to governing rules should be removed as this part of the law is fundamentally flawed whereas other members thought that the provisions are workable now that the ATO has provided further guidance.

    Law update

    Review of ATO public advice: the ATO explained that it is reviewing its public advice and guidance products. The review is looking at the currency of rulings and considering broader changes to the provision of ATO public advice.

    Work will also commence to bring ATO web content up-to-date including NFP content. A change has already been made to the GiftPack in relation to the advice about the objects and purposes requirements for NFPs.

    Updating ATO ‘in Australia’ advice: the ATO noted that because of the ongoing uncertainty of any legislative response to the ‘in Australia’ issue, the decision has been made to update ATO advice products that touch on that issue. In summary the ATO plans to:

    • draft a short advice product setting out the ATO view of the ‘in Australia’ issue in relation to Divisions 30 and 50 of the ITAA 1997 and providing practical guidance as to what an entity would need to have in place to retain its tax concession status
    • withdraw taxation rulings TR2003/5 and TR2004/8
    • add an addendum to TR2011/4.

    Discussion

    • Members asked what the ATO’s view of the ‘in Australia’ issue means for overseas aid. The ATO acknowledged that this question needs to be addressed and that the impact on policy intent also needs to be taken into account.
    • Members noted that the ‘sole’ purpose provision is a concern. Treasury asked if a change to the law to ‘purpose or purposes’ would address concerns and members responded that they were not sure – Treasury will follow up on this.
    • Action needed to ensure that Treasury and government understand the impact of the ‘in Australia’ issue on overseas activities and overseas aid to ensure good policy decisions.

    DSS update

    DSS has briefed the Minister on the results of public consultation on the proposed repeal of the ACNC and he is considering the advice provided by DSS which also includes advice about the repeal of the Charities Act.

    ATO Not-For-Profit update

    The ATO provided a brief summary of the latest NFP Health of the System Analysis (HOTSA). Members asked that the ATO provide more detail about the areas of focus for the ATO (e.g. risks and other strategic priorities) in the NFP space at the next meeting.

    The Handover Checklist for NFP Administrators will be published by June 2015. The ATO thanked members for their feedback on this product.

    ABN application guidance product will be finalised by June 2015.

    ATO provided a brief summary of initial findings from the Ancillary fund return statistics as follows:

    • the statistics cover the last three years
    • investments held in publicly listed shares are trending upward whereas cash has remained static
    • cash gifts are preferred
    • areas of concern include the valuation of shares and non-arm’s length transactions.

    The issue of Proof of Identity raised in previous meetings was again addressed and the ATO noted that:

    • part of the ATO response is the progress of the Handover Checklist
    • ATO is also looking at using ACNC data to help keep NFP contact details updated.

    Discussion

    • Members noted that an NFP entity may have different people listed as ATO contacts for different purposes e.g. an ABR contact and an AusKey contact.
    • Members suggested that the ATO could perhaps accept meeting minutes as evidence that a person is the authorised contact for an organisation.
    • Members noted that some grant providers are asking for an AusKey account however, there is an element of fear in the NFP sector about AusKey.

    Single Touch Payroll consultation update

    A representative from the Single Touch Payroll consultation team attended the meeting and provided an update to the Group, noting the four key themes that emerged from the consultation process (see below). ATO management is considering the consultation results and the outcome will feed into a joint ATO/Treasury submission to government which will be considered in late April.

    Transitional arrangements and support

    The ATO proposes to provide real time, face-to-face support where needed.

    Cost of compliance

    The ATO recognises that there will be an initial increase in red-tape, mainly around technology issues.

    Cash flow

    Software requirements

    A consideration is whether the government will provide support to upgrade.

    Discussion

    • Some members noted that the NFPs that they represent are very anxious about the proposed changes. The ATO acknowledged this and thanked those members that made submissions to the consultation process.
    • Members were advised that another round of consultation is starting soon, this time the topic is Digital by Default and members will be advised when the consultation period begins.

    Reinventing the NFP/ATO experience

    The ATO spoke about the progress of the ‘Reinventing the ATO’ Program and described some practical changes that could be made to improve the NFP client experience in line with the ATO’s six Strategic Priorities, for example (and this list is not exhaustive):

    An ATO online information service for NFPs To provide one home for all services for NFPs to navigate easily and seamlessly to services that they need, a one-stop-shop for information and services. Perhaps something similar to the Small Business Newsroom and also drawing on the example set by the ACNC.

    A web based product that would give NFPs more timely, accessible advice and at the same time reducing compliance costs This idea includes an online self-service decision tool (in an on-line interview format) that would provide a tailored response to help NFPs get things right. Depending on the needs and circumstances of the NFP, the tool will give general information or provide absolute certainty by producing a private binding ruling ‘anywhere, anytime’. This is an idea being designed for other client groups across the ATO and we think it may have application for NFPs.

    A way for NFPs to access expert ATO advice when they need it This idea is to give NFPs more choice about how and when they can talk to someone from the ATO about issues that matter to them, for example:

    • an NFP could book an appointment to talk to ATO and ACNC representatives at the same time about applying to be a charity and the related tax concessions
    • Chatrooms and webinars on topical NFP issues
    • Videos on topical NFP issues and ‘how to’ guides
    • ATO partnering with NFPs to provide face-to-face education and help events tailored for sections of the NFP sector.

    Online interactive forms for NFPs The idea is to give NFPs a better, more contemporary service when it comes to complying with tax obligations. For example, when a charity chooses to seek ATO endorsement for charity tax concessions subsequent to seeking charity registration from the ACNC they should have a similar interactive online application experience to that provided on the ACNC website.

    Expansion of prefilling for deductible gift amounts This idea is that gifts to NFPs would be recorded electronically in a way that can be integrated with ATO systems, allowing prefilling of the relevant part of the income tax return for donors.

    The ATO canvassed the idea of setting up structured working groups, out-of-session to look at different proposals and perhaps consulting with the wider NFP sector using the ‘round table’ concept.

    Discussion

    • The NFP sector is not one homogenous group, not just big or small but sub-groups, another way of looking at the sector is in terms of size and then different segments.
    • If it’s about addressing problems then there are some issues that are consistent across the NFP sector.
    • Micro organisations are a challenge for those that are not operating as a ‘business’ it might be asked ‘why are they in the system?’ Should there be a threshold for the charity register?
    • Those that are community/volunteer based are sometimes not part of a network and ‘they don’t know what they don’t know’.
    • Local government can be a way to distribute information to community groups
    • The ACNC Commissioner’s newsletter is a good example of a personal approach that works for some, the ACNC has managed to break down some of the barriers for charities.
    • The level of engagement goes up once trust is built up.
    • What if I’ve got a problem, where do I go? A one-stop shop for all NFP questions and support is needed along the lines of the ACNC for charities.
    • Something like a charity portal and relationship managers.
    • Web chat.
    • The idea of pre-filling of donation information causes concern for some.
    • If the ATO can provide some information or videos about what the ATO is trying to do then members could distribute these through their networks and ask for feedback and comments perhaps four or five focussing questions.
    • Members suggested that the ATO look at the responses to the small business review because NFPs face a lot of the same issues.

    Here is a link to the Small Business Review referred to by members, Reviews and Consultations -Review of Impediments Facing Small BusinessExternal Link

    ABR issues

    Discussion

    • The charity sub-type issue is just part of a broader issue and is unsatisfactory.
    • Members asked how the ABR issues can be resolved and whether the Group as a whole can do something to move things along.
    • Members emphasised the importance of resolving ABR issues for the NFP sector and asked that this be communicated to those responsible for resolving the issues.

    Public ancillary fund trust deeds – ATO guidance

    The Group discussed the proposal by a member regarding ATO guidance on trust deed amendments that might be necessary to comply with Public Ancillary Fund Guidelines. The general consensus was that the recommendations made in these submission appear reasonable and in line with policy.

    It was agreed that a working group made up of members and ATO representatives will be set up soon after this meeting to decide on the necessary approach.

    Other business

    Next meeting - 15 July 2015

    Action items

    Action item:

    NFPAG01-15

    Due date:

    Monday 4 May 2015

    Responsibility:

    Joe Zabar

    Status

    Provide the Group with a summary of the ‘directed care’ issue including consideration of how NFPs will need to operate in future under the ‘directed care’ model and what NFPs offer that ‘for profits’ do not.

    Completed: See words under NFP Perspective Presentations in the meeting notes

     

    Action item:

    NFPAG02-15

    Due date:

    Friday 29 May 2015

    Responsibility:

    Gess Sottile

    Status

    Set up a meeting between ATO, Treasury and ACNC to discuss consequences for NFPs of the new ‘directed care’ model of funding. Dependant on completion of NFPAG01-15.

     

    Action item:

    NFPAG03-15

    Due date:

    Wednesday 15 July 2015

    Responsibility:

    Elizabeth McKinnon & Robyn Ayres

    Status

    July meeting NFP presentations

     

    Action item:

    NFPAG04-15

    Due date:

    Monday 1 June 2015

    Responsibility:

    All

    Status

    Members should consider making submissions to the tax white paper process if they have suggestions for change or issues they want addressed. Here is a link to the Tax White Paper

    Discussion Paper - Tax White Paper (PDF, 4.03MB)This link will download a file

     

    Action item:

    NFPAG05-15

    Due Date:

    Monday 1 June 2015

    Responsibility:

    Gess Sottile

    Status

    Set up a working group to discuss:

    • The implications of the ATO view of the meaning of "in Australia" in the current law (Div. 30 and Div. 50); and

    The preparation of a public ruling or other products covering the meaning of "in Australia" and any other issues identified by members in response to action item NFPAG06-15.

     

    Action item:

    NFPAG06-15

    Due date:

    Friday 29 May 2015

    Responsibility:

    All

    Status

    Members to provide feedback on specific parts of ATO rulings proposed for withdrawal (TR 2003/5, TR 2004/8) that would be beneficial to keep in some other form. Feedback to be provided via the NFPAdvisoryGroup@ato.gov.au inbox

     

    Action item:

    NFPAG07-15

    Due date:

    Wednesday 15 June 2015

    Responsibility:

    Albert Beric

    Status

    ATO will provide more details about areas of focus for the ATO. Following discussion about the latest NFP Health of the System Analysis (HOTSA), members asked that the ATO provide more detail about the areas of focus for the ATO (e.g. risks and other strategic priorities) in the NFP space at the next meeting.

     

    Action item:

    NFPAG08-15

    Due date:

    Monday 8 June 2015

    Responsibility:

    Gess Sottile

    Status

    Provide members with a summary diagram of proposed ATO NFP reinvention initiatives that can be distributed through member networks with a request for feedback and ideas.

     

    Action item:

    NFPAG09-15

    Due date:

    Wednesday 15 July 2015

    Responsibility:

    Ilana Millar

    Status

    ATO will follow up on an issue raised by the Salvation Army about input taxed fundraising. It was noted that, because of the size of the Salvation Army there are issues with accessing the GST input taxed fundraising provisions because these are limited to only 15 fundraising events per annum.

    Completed: The ATO provided a response to this issue, suggesting an alternative approach and a contact name and number in the GST area for the Salvation Army to contact if they wish to discuss the issue further.

     

    Action item:

    NFPAG10-15

    Due date:

    Wednesday 15 July 2015

    Responsibility:

    Gess Sotille

    Status

    ATO communication product for NFPs about the suppression option on the ABR

     

    Action item:

    NFPAG11-15

    Due date:

    Wednesday 15 July 2015

    Responsibility:

    Chair

    Status

    ATO to seek further commitment from BRR to resolve ABR issues affecting NFPs, as requested by this Group

     

    Action item:

    NFPAG12-15

    Due date:

    Wednesday 15 July 2015

    Responsibility:

    Gess Sottile

    Status

    Set up a meeting for a working group to consider how the ATO will respond to issues raised by John Emerson in relation to the variation of public ancillary fund trust deeds

    Completed. First meeting of this working group was 15 April 2015. The working group comprises NFPAG - John Emerson, Krystian Seibert, Paul Ingram, and ATO - Ilana Millar, Jeremy Khaw, Mark Ferguson. Changes have been agreed and will be published in the near future.

      Last modified: 04 Aug 2015QC 46578