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  • Not-for-profit Stewardship Group key messages 19 November 2019

    Welcome and introduction

    Members were welcomed and an acknowledgement of country was given.

    No conflicts of interest were declared.

    Administration

    The meeting minutes from August 2019 were accepted. All the action items from that meeting have been completed, except one item related to possible Treasury review of the special considerations under Division 50–50. Treasury is an apology today, so the item will be held over for 2020. Jennifer Moltisanti will arrange a meeting with Treasury and relevant Not-for-profit (NFP) Stewardship Group (the Group) members to discuss.

    The latest version of the new charter was circulated with the agenda and members were asked to note the dates for the 2020 meetings.

    Members were asked to review the NFP web pages on ato.gov.au and provide feedback to the secretariat for readability and usability.

    Shaping the Not-for-profit system for integrity and assurance

    Jennifer Moltisanti provided an update and advised how feedback from the last workshop was integrated into ATO work flows, guidance documents and webinars. It will also be incorporated into future work programs being undertaken i.e. Franking Credits and Private Ancillary Funds (PAF). When available the reviewed PAF Guidelines will be distributed to the Group and shared through the NFP Newsroom and the ATO welcomes feedback.

    Frances Gobel, facilitated today’s workshop which focussed on the population of self-assessing tax exempt not for profits. The aim was to gain a deeper understanding of the different clusters of self-assessing NFPs and how the ATO may better support them to understand and meet their obligations.

    The NFP Centre wanted to identify how to achieve greater visibility of self-assessing NFPs without adding onerous compliance burdens, and to work with those that NFPs naturally turn to seek support and advice in the sector.

    The group was asked to use their experience and insights to focus on sporting clubs and community service organisations and to discuss the issues and challenges faced by these groups.

    The group discussed that the ATO may not be the natural first point of call for many NFPs. They are likely to seek guidance from other peak bodies and peers. We identified potential ways for the ATO to work together to achieve greater integrity, community confidence and certainty for those who are self-assessing and income tax exempt. Some key points included:

    • leveraging natural engagement, support and other touch-points in the system
    • identifying who NFPs naturally seek help and support from
    • ways in which we can make it easier for them to obtain the right help, when and where they need it
    • potentially working with state and local government regulators to improve understanding of the self-assessing population and provide proactive support.

    Treasury update

    Jennifer Moltisanti provided the Treasury update as proxy for Jacky Rowbotham who was an apology.

    The new Deductible Gift Recipient category for Men's and Women's Sheds comes into effect on 1 July 2020.

    On 16 September 2019, the Assistant Minister for Finance, Charities and Electoral Matters issued updated Private Ancillary Fund Guidelines.

    The Currency (Restrictions on the Use of Cash) Bill 2019 implements a cash payment limit that applies to transactions for goods or services of $10,000 or more. The Bill has a start date of 1 January 2020 and is currently before the Parliament. The Bill has been referred to the Senate Economics Legislation Committee with the report due 7 February 2020. The cash payment limit means that charities will not be able to accept cash donations of $10,000 or more. Charities would still be able to receive individual cash donations below $10,000. Jennifer Moltisanti took a question on notice for Jacky Rowbotham for the next meeting.

    Technical update

    Sporting Clubs

    Taxation Ruling TR 97/22 Income tax: exempt sporting clubs is being reviewed to provide clear public advice that promotes a shared understanding of what is required to satisfy the games and sports exemption. The working group met in September and was provided with a consultation paper for discussion. In October, The Public Advice and Guidance (PAG) Panel was consulted for advice on:

    • the consequences of the decision of the High Court in Word Investments for the games and sports exemption.
    • the analysis of factors used to determine the main purpose of a society, association or club in the context of the games and sports exemption.

    We are working to finalise a draft ruling following the advice received from the PAG Panel and will be looking to consult with the sporting club sector in the new year.

    In Australia

    During September and October the 'In Australia' working group met twice to provide input into the finalisation of draft Taxation Ruling TR 2018/D1 Income tax: the 'in Australia' requirement for certain deductible gift recipients and income tax exempt entities. Following the last working group meeting the authoring team has made adjustments to the parts of the Ruling dealing with the ‘expenditure incurred and objectives pursed’ test.

    The ATO is working to finalise the draft of the Ruling by the end of the year.

    Reviewing the 50–50 method for calculating meal entertainment for registered clubs

    Amanda Spinks discussed the 50–50 method for calculating meal entertainment for Registered Clubs and explained that:

    • in accordance with the Fringe Benefits Tax (FBT) legislation, the taxable value of meal entertainment benefits may be calculated under one of three methods, the most common being the 50–50 split method and the actual method
    • under the 50–50 split method, the total value of all meal entertainment is halved and then subject to the FBT rate. This is regardless of the receipt of the entertainment benefit.
    • the 50–50 method is typically easier to use than the actual method, as the actual method requires analysis of each line item of meal entertainment provided in order to determine the recipients and to pick up the correct portion as subject to FBT
    • however, based on the current legislation, if an employer in the entertainment industry, for example a Registered Club elects to use the 50–50 split method; they would need to include all costs in relation to providing entertainment. In practice that would mean including all food and drink cost of goods sold (COGS) expenses, for example every bottle of wine or keg.

    Tim Dyce endorsed Amanda Spinks becoming a member of the FBT sub-working group so that the NFP perspective could be included in the work and the NFP Stewardship Group view could also be communicated. Jennifer Moltisanti will look into the potential for an integrated FBT/NFP sub-working Group. Amanda Spinks will work with Anthony Trimarchi as the representative of Clubs NSW to source examples and quantify the issue.

    Implications of the new definition of Not-for-profit being developed for financial reporting purposes

    Ram Subramanian CPA Australia outlined the implications of the new definition of NFP being developed for financial reporting purposes and sought input from the group.

    The Australian Accounting Standards Board (AASB) issued an Exposure Draft ED 291 that proposes a new definition of NFP for financial reporting purposes.

    The proposed new definition is: An entity whose primary objective is to provide goods or services for community or social benefit and where any equity has been provided with a view to supporting that primary objective rather than for a financial return to equity holders.

    ED 291 suggests that some charities registered with the Australian Charities and Not-for-profits-Commission (ACNC) may not meet the proposed new definition. It is also understood that some membership based NFP organisations e.g. sporting clubs, may not meet the new definition.

    Ram Subramanian asked what the Group thought of the proposal, and asked whether an entity that does not meet the proposed new NFP definition for financial reporting purposes, would continue to be considered a NFP for other purposes including taxation and registration as a charity with the ACNC.

    Jennifer Moltisanti noted that she was meeting with the AASB and offered to represent the Groups consolidated views on this topic. Jennifer Moltisanti asked the Group to provide their view to the NFP Stewardship Group secretariat or directly to her.

    ACNC-ATO proposed joint program of work

    Jennifer Moltisanti noted that the ACNC and the ATO hold mutual yet independent roles in effective administration and regulation of registered charities. They perform separate legislative functions to administer the same charities.

    On 31 July 2019, the ACNC and ATO held a joint workshop to consider the strengths of the current relationship and the strategic outcomes to be achieved over the next three years as it applies to:

    • joint administration of charitable entitlements and tax concessions.
    • compliance activities.

    The ATO and the ACNC are developing a joint-program of work and an ‘in-confidence’ draft was handed out during the meeting. It outlines proposed objectives, proposed priorities and expected benefits for continuing a strategic approach to carrying out ATO and ACNC independent roles in administering and regulating registered charities.

    Jennifer Moltisanti invited members to provide feedback with respect to the draft program of work tabled as part of the agenda.

    ACNC update

    Mel Yates mentioned the following points:

    • approximately. 33,500 charities have their 2019 Annual Information Statement due by 31 January 2020 and it is recommended that they lodge as soon as possible before the due date
    • extensions have been granted until 31 March 2020 for charities affected by recent bushfires
    • the 2-year transition period ended for SA, TAS and ACT. These charities must fully meet the ACNC reporting requirements for 2019 reporting period
    • 1,200 charities were revoked in September following double defaulter process
    • the ACNC has created a new page on The ACNC websiteExternal Link about accounting and auditing standards
    • A webinarExternal Link - Reporting to the ACNC is on 21 November.
    • ACNC is preparing to start Deductible Gift Recipient (DGR) eligibility reviews in July 2020.
    • Anna Longley has been appointed General Counsel for the ACNC.

    The group asked questions about transition timing and what opportunities DGRs will have to become compliant. Jennnifer Moltisanti offered to contact Jacky Rowbotham from Treasury to provide a view on transitioning provisions for any new law on DGR eligibility rules and an exposure draft. This could be scheduled for the next meeting.

    Single Touch Payroll

    Daren Glanville gave an update on Single Touch Payroll (STP) and discussed the following points.

    • There are 780 employers (with greater than 20 staff) that have not started to report to STP.
    • Fifty of those employers are NFPs.
    • The ATO is now taking firmer action and has started to issue final demand letters to who are not reporting and have not asked for a deferral.
    • In late November 2019, the ATO will commence an STP phone campaign for substantial NFPs who are not covered by a deferral or commenced reporting. The campaign approach will focus on
      • STP awareness and education
      • offer support for transition.
       

    Darren Glanville asked the Group members to encourage any large NFPs they know who need help and assistance to contact the ATO.

    NFP Centre update

    Given the time constraints of the meeting Jennifer Moltisanti asked members to note the work undertaken since the commencement of the NFP Centre. Jennifer Moltisanti commented that the attachments provided for this agenda item focussed on:

    • what we are seeing in the NFP sector
    • what we are doing to deliver on the role of the NFP Centre
    • our future roadmap and expectations for the role of the NFP Centre.

    Jennifer Moltisanti referenced the three agenda attachments for the NFP Centre update and invited members to review and provide feedback.

    • NFP Centre update
    • Not-for-profit Centre and Government Plan 2019–20
    • Not-for-profit Centre – November 2019

    Meeting close

    Jennifer Moltisanti thanked the group for their input and noted the next meeting is scheduled for 12 February 2020 at the ATO office in Melbourne.

    Action item update

    Action item

    NFPSG 18–19

    Due date

    Next meeting

    Responsibility

    Jacky Rowbotham

    Description

    Treasury will provide an update on any consideration for review of the special conditions under Division 50-50. Due 19 November 2019 but held over for 2020 due to Jacky Rowbotham being an apology.

     

    Action item

    NFPSG 22–19

    Due date

    15  December 2019

    Responsibility

    Members

    Description

    Members were asked to note and share the following messages through their networks:

    • The Private Ancillary Fund Guidelines 2019External Link came into effect from 21 September 2019 and replaced the 2009 Guidelines.
    • Private Ancillary Funds must comply with the guidelines and penalties apply for non-compliance.
    • Publication of the Private Ancillary Fund Guidelines 2019External Link provides a timely opportunity for PAFs to review compliance with the 2019 guidelines. In particular PAFs need to ensure funds:
      • meet the minimum annual distribution for each year
      • maintain and follow an investment strategy
      • do not provide benefits directly or indirectly to entities that are not DGRs.
       
     

     

    Action item

    NFPSG 23–19

    Due date

    15 December 2019

    Responsibility

    Members

    Description

    Jennifer Moltisanti to provide information to members about how risk is assessed for PAFs.

     

    Action item

    NFPSG 24–19

    Due date

    7 February 2020

    Responsibility

    Jacky Rowbotham

    Description

    Treasury to provide clarity and guidance for NFPs about how the Currency (Restrictions on the use of cash) Bill 2019 applies in practice to cash payments greater than $10,000. Questions asked by members include:

    • Does the payee decline payment, or accept cash payment and report it?
    • Does the limit apply on an annual basis? For example, if a single donor makes several donations under $10,000, is the total relevant?
     

     

    Action item

    NFPSG 25–19

    Due date

    As soon as possible

    Responsibility

    Jennifer Moltisanti

    Description

    Jennifer Moltisanti to arrange meeting with AASB and Stewardship Group members to further discuss impact of proposed AASB definition of Not-for-profit.

     

    Action item

    NFPSG 26–19

    Due date

    20 December 2019

    Responsibility

    Members

    Description

    Members asked to provide their succinct views with respect to the proposed AASB Not for profit definition so that Jennifer Moltisanti can provide an update of the Stewardship Group’s views to the AASB.

     

    Action item

    NFPSG 27–19

    Due date

    7 February 2020

    Responsibility

    Mel Yates / Anna Longley

    Description

    Mel Yates to share the ACNC’s response provided to the AASB about the NFP definition with Jennifer Moltisanti.

     

    Action item

    NFPSG 28–19

    Due date

    26 March 2020

    Responsibility

    Secretariat

    Description

    Secretariat to include 'Proposed Australian Accounting Standards Board (AASB) Not-for-profit definition' on the agenda for the next NFP Stewardship Group meeting.

     

    Action item

    NFPSG 29–19

    Due date

    7 February 2020

    Responsibility

    Members

    Description

    Members were invited to provide feedback/comments on the ACNC-ATO proposed joint program of work. Paper included at 19 November 2019 meeting.

     

    Action item

    NFPSG 30–19

    Due date

    20 December 2019

    Responsibility

    Jennifer Moltisanti

    Description

    Jennifer Moltisanti to contact Jacky Rowbotham from Treasury to request an overview on how affected entities will work through the transition period regarding changes to new laws on DGR eligibility, including information for existing DGRs that are not registered charities and new DGR applicants that have applications in the system at the time of the transition. Treasury to incorporate update in their agenda item at the next meeting.

     

    Action item

    NFPSG 31–19

    Due date

    7 February 2020

    Responsibility

    Members

    Description

    Members are encouraged to circulate Single Touch Payroll (STP) messages through their networks.

    • The ATO continues to help smaller employers make the transition to STP, information disseminated through ato.gov.au website, NFP newsletter updates and other communication activities.
    • Larger employers with 20 or more employees were required to start STP reporting from 1 July 2018.
    • From January 2020, the ATO may start firmer action for larger employers with 20 or more employees, including NFPs, who are yet to start reporting using STP.
    • NFP large employers with 20 or more employees who are yet to transition reporting to STP are encouraged to contact the ATO if they require assistance or support.

    For more information about when to start reporting, visit ato.gov.au/singletouchpayroll

     

    Action item

    NFPSG 32–19

    Due date

    7 February 2020

    Responsibility

    Members

    Description

    Members were invited to note the following NFP Centre documents:

    • NFP Centre and Government Plan 2019–20, Attachments I and J from 19 November 2019 meeting
    • NFP Centre November 2019 update, Attachment K from 19 November 2019 meeting
     

    Attendees

    Attendees are listed below.

    Organisation

    Members

    ATO

    Tim Dyce (Co-chair), Private Wealth

    ATO

    Anthony Buman, Private Wealth

    ATO

    Daren Glanville, Superannuation and Employer Obligations

    ATO

    Frances Gobel, Private Wealth

    ATO

    Jennifer Moltisanti, Private Wealth

    ATO

    Jessica Wallace, Superannuation and Employer Obligations

    ATO

    John Churchill, Tax Counsel Network

    ATO

    Melinda Knight, Private Wealth

    ATO

    Michael Barilla, Private Wealth

    ATO

    Simon Haines, Tax Counsel Network

    Arnold Bloch Leibler

    Joey Borensztajn

    Australian Charities and Not-for-profits-Commission

    Mel Yates

    Australian Federation of Disability Organisations

    Ross Joyce

    Australian Institute of Company Directors

    Christie McGrath

    Catholic Social Services Australia

    Joe Zabar

    Centre for Social Impact, Swinburne University of Technology

    Krystian Seibert

    Clubs Australia

    Anthony Trimarchi

    Community Council for Australia

    David Crosbie

    CPA Australia

    Ram Subramanian

    EY

    Amanda Spinks

    Justice Connect

    Annie Keely

    Law Council of Australia

    Alice MacDougall

    Philanthropy Australia

    Sarah Wickham

    Prolegis Lawyers

    Anne Robinson

    Salvation Army

    John McIntosh (Co-chair)

    The Tax Institute

    Bridgid Cowling

    Treasury

    Nick Berger-Thomson

    Apologies

    Apologies are listed below

    Organisation

    Members

    Australian Institute of Company Directors

    Phil Butler

    Giuntabell

    Nunzio Giunta

    Justice Connect

    Juanita Pope

    Law Council of Australia

    Jennifer Batrouney

    PricewaterhouseCoopers

    Judy Sullivan

    Treasury

    Jacky Rowbotham

    University of NSW Business School

    Fiona Martin

      Last modified: 04 Mar 2020QC 61593