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

Attendees

Apologies