Show download pdf controls
  • Not-for-profit Stewardship Group minutes 19 July 2017

    Meeting details

    Venue

    Melbourne

    Date

    19 July 2017

    Start

    10.00am

    Finish

    3.00pm

    ATO co-chair

    Rod Walker, NFP Strategy Team and Client Experience

    Community co-chair

    Joe Zabar, Catholic Social Services Australia

    Contact and secretariat

    Gess Sottile

    Phone

    (02) 6216 2264

    Attendees

    Organisation

    Name and title

    ACNC

    Murray Baird, Assistant Commissioner and General Counsel

    Arts Law Centre

    Robyn Ayres, Executive Director

    Australian Institute of Company Directors (AICD)

    Phil Butler, NFP Sector Leader

    Catholic Social Services Australia (Co-Chair)

    Joe Zabar, Director Strategic Policy and Engagement

    Herbert Smith Freehills

    John Emerson, Consultant

    Jobs Australia Ltd

    David Thompson AM, CEO and member of the Board of the National Roundtable of Nonprofit Organisations

    Justice Connect

    Sue Woodward, NFP Law (for Juanita Pope)

    Natasha Sekulic, ATO Secondee to NFP Law

    Law Council of Australia

    Matthew Turnour (for Jennifer Batrouney)

    Philanthropy Australia

    Krystian Seibert, Advocacy & Insight Manager

    Prolegis Lawyers

    Jae Yang (for Anne Robinson)

    Salvation Army

    John McIntosh, Charities Tax Advisory Service

    Tax Institute

    Michelle Hartman, Partner, Deloitte Touche Tohmatsu

    Treasury

    Murray Crowe, Ross Gillott

    ATO

    Martin Jacobs, Assistant Commissioner, Technical Excellence and NFP experience lead

    Rod Walker, Senior Director NFP Strategy and Client Experience

    Mark Ferguson, Manager NFP Policy & Law

    Matthew Petersen, NFP Risk Manager

    Justin Dearness (for Ilana Millar), Tax Counsel Network

    Iris Sin (by Phone), Compliance Director, Engagement & Assurance Services

    John Birkett, Senior Director, Indirect Taxes

    Mark Weber, Indirect Taxes

    Robert Drummond, (by phone) Assistant Commissioner, Business Reporting and Registrations, Operations

    Geoff Fisher (by phone for Sally Bektas) Marketing and Communications Audience team

    Rebecca Webb-Johnson (by phone), Director Marketing and Communications Government and NFP audiences

    Deborah Becker (by phone), Policy Analysis and Legislation

    Secretariat

    Gess Sottile, Secretariat, ATO NFP Strategy Team, NFP Reinvention

    Apologies

    Prof. Myles McGregor-Lowndes, Director, Australian centre for Philanthropy and Nonprofit Studies, QUT

    Nunzio Giunta CPA, Managing Director, Giuntabell

    Tim Dyce, Deputy Commissioner and NFP Client Experience Owner

    Albert Beric, Director, NFP Risk and Strategy

    Next meeting: 8 November, Canberra.

    Record of meeting

    Welcome

    The ATO co-chair opened the meeting with an acknowledgment of the traditional owners and custodians of the land.

    After welcoming all attendees to the meeting, the ATO co-chair announced that the external co-chair’s tenure would be extended for a further year to align with the two year tenure of external members.

    The progress of action items from the March 2017 meeting were discussed with the following updates provided.

    • Items NFPSG 3-17 and 4-17 ATO’s review of benchmark market values – The ATO advised that the review of the benchmark market values has taken longer than originally anticipated. It was noted that while the feedback from members was quite comprehensive, the ATO had to undertake further research and evaluations of potential data sources which has taken additional time. The Community co-chair noted that he would like to see progress before the next meeting of this group. The ATO undertook to discuss outcomes with members in an out-of-session meeting in order to progress the matter as soon as possible.
    • Item NFPSG 5-17 ATO Compliance approach for Ancillary Funds and the administration of related penalties – In relation to the administration of penalties, all feedback received from members was included in revised products that are expected to be published by August 2017. In relation to the compliance approach to Ancillary Funds, the ATO advised that it will consult with members about this before publishing updated information.
    • Item NFPSG 12-17 Process and procedures around ACNC Responsible Persons being able to update ABR records – Telephone scripting has been updated to make it clear that ACNC recognised responsible persons have the authority to update ABR records for their charity with the exception of associate and financial institution details. Members were asked to advise the Secretariat if they become aware of this scripting not being followed.
    • Item NFPSG 13-17 The ATO will determine the legislative or administrative requirements behind Question 23 on the FBT return and then consult with the NFP Stewardship Group on next steps – The ATO advised that this important issue is under active consideration and various options are being developed that are designed to reduce red tape and improve the NFP client experience. The ATO will consult with members in an out-of-session meeting in the near future to discuss options.

    Confirmation of 8 March 2017 meeting notes

    The record of the 8 March 2017 meeting was confirmed and is now available here:

    ATO Secondee to Justice Connect observations and experience

    Natasha Sekulic, an ATO law interpretation officer on secondment to Justice ConnectExternal Link shared her experience and learnings so far with the group. This is the first secondment of an ATO officer with a not for profit organisation (NFP). Some of the key observations from Natasha were:

    • The breadth and complexity of obligations for NFPs, including at the state government level, is significant, even for someone with government experience.
    • Tax and super obligations are only one small element of the compliance obligations on NFPs.
    • Surprise at the diversity of NFP organisations and the work they do.
    • The observation that, until you work with NFPs you really don’t understand their experience; it is a really powerful experience to ‘walk in someone else’s shoes’.

    Discussion followed and some key of the points raised included:

    Action item:

    Due Date:

    Responsibility:

    NFPSG 17 - 17

    March 2018

    Krystian, Joe, Rod

    Meet with Public Service Commission and Prime Minister’s Community and Business Partnership to share learnings.

    November 2017 update: This item will be progressed early in the 2018 calendar year.

    Common Reporting Standards (CRS) update

    The ATO advised that it has published new guidance information about the OECD’s Common Reporting Standards including flowcharts to help NFPs and their advisors understand if they have any obligations under this new regime and has recently contacted around 3,000 NFPs that may be affected.

    Discussion followed including the following key points:

    • it is important that the new published information is easy to find and ‘pushed’ to those that may be affected
    • it is important to make it clear up-front which organisations are not affected, providing reassurance to smaller NFP organisations that don’t have to do anything
    • tax agents and other intermediaries are an important target audience for messages about these new requirements
    • when developing new products such as flowcharts, it is important to test them with the target audience
    • it is important to publish timely information when there are new requirements and push this information to target audiences that need to know at the right time.

    Action item:

    Due Date:

    Responsibility:

    NFPSG 19 - 17

    March 2018

    ATO's Marketing and Communication Team

    The ATO should consider making the updated CRS information more overt for example, a banner on the NFP landing page as well as exploiting other channels to push the information to those that need to know about the changes.

    November 2017 update: The ATO will also consider tailoring the CRS guidance material for NFPs more along the lines of the UK model..

    Treasury consultation – Tax deductible gift recipient (DGR) reform opportunities discussion paper

    This agenda item provided Treasury an opportunity to consult with the group on the Tax deductible gift recipient (DGR) reform opportunities discussion paper. Members received a very helpful briefing from Treasury in particular some of the key issues which the Government is keen to address. Treasury also outlined the next steps in this process.

    Treasury was advised that many of the members present would be making separate submissions to the review. There was consensus amongst the NFP members on their support or otherwise of the reform issues discussed. There was general support for the red-tape reduction.

    In closing Treasury offered the following comments:

    • The intention of the discussion paper is to canvass good reform options, identify opportunities to cut red tape, and find ways of improving governance.
    • The outcomes from the Division 50-50 working group are valuable and will be considered.
    • Treasury views the Stewardship as a critical consultation group on tax matters that affect NFP organisations including deductible gift recipients.

    Action item:

    Due Date:

    Responsibility:

    NFPSG 21 - 17

    Completed

    Treasury

    Treasury to revisit issues in relation to ‘in Australia’ and discuss with members of the NFP Stewardship Group to determine options for providing clarity.

    ATO Law update

    Review of public advice working group

    The ATO’s Tax Counsel Network representative provided an update on the Review of public advice as it relates to ATO advice products on topics specific to NFPs, as follows.

    • A Public Advice Working Group has been established, drawing from this group, and in June the ATO consulted with the working group about a number of taxation rulings it is updating on topics specific to NFPs.
    • The rulings are being updated to reflect legislative and case law developments and adopting the ATO's new style conventions for the production of public advice and guidance.
    • A main purpose of the ATO consultation is to check that the proposed changes are correct and that the rewrites have not inadvertently disturbed views that remain current. The taxation rulings currently under review are:
      • TR 92/17 Income tax and fringe benefits tax: exemptions for 'religious institutions'
      • TR 95/2 Income tax: Overseas Aid Gift Deduction Scheme
      • TR 95/27 Income tax: public funds
      • TR 97/22 Income tax: exempt sporting clubs
       
    • The ATO has commenced, and will continue to hold separate consultation events with affected stakeholders for these subjects prior to release of the updated public advice.
    • In July a meeting was held with representatives from the religious sector on TR 92/17 Income tax and fringe benefits tax: exemptions for 'religious institutions' and the ATO intends to hold further consultation events on this ruling with a more diverse group of religious sector representatives before releasing an updated draft ruling.

    Cultural gifts program reform

    The ATO is working with the Department of Communication and the Arts on options to simplify the process for obtaining a tax deduction for donations under the Cultural Gifts Program (CGP). When this work is complete the current CGP ruling TR 96/1 will be withdrawn and replaced with general guidance.

    Submission from Foodbank Australia

    A submission was received in April 2017 from the CEO of Foodbank AustraliaExternal Link seeking advice as to whether this group might be an appropriate vehicle to progress a law change proposal in relation to donations of food. Following discussion the group concluded that:

    • The primary role and focus of the NFP Stewardship Group is:
      • To consider issues around current tax administration and law as they relate to not for profits, and
      • To consult on new policy initiatives proposed by government (e.g. tax deductible gift recipient reform opportunities).
       
    • Commenting on the merits of a law change proposal requiring a change in government policy or advocating a change of government policy on behalf of individuals or groups is considered out of scope for the NFP Stewardship Group. However, if government were to consider the proposal suggested by Foodbank Australia, then the views of the NFP Stewardship Group may be sought.

    Action item:

    Due Date:

    Responsibility:

    NFPSG 22 - 17

    Completed

    ATO chair/Secretariat

    • A response will be provided to the CEO of Foodbank Australia outlining the outcomes and thanking them for their inquiry
    • The information about the role of the NFP Stewardship Group on ato.gov.au will be updated to reflect a refining of the description of the role of the group.
     

    Risk and Assurance update

    NFP Client engagement and assurance

    The ATO’s NFP Client engagement and assurance Director provided an update as follows.

    Self-assessing entities project

    The ATO is progressing reviews of self-assessing income tax exempt entities. In order to maintain the integrity of the tax system and ensure that appropriate entities are entitled to be income tax exempt, regular reviews of self-assessing entities are important as they are not required to be endorsed or registered with the ATO. The ATO has contacted some self-assessing income tax exempt entities and is waiting for others to respond. The types of issues the ATO is seeing include entities that:

    • should be registered with the ACNC
    • do not satisfy the relevant tax exempt category
    • have lodgment obligations
    • have possible taxation liabilities.

    School building funds

    The key focus of the strategy is to select a sample number of cases across a broad range of school building fund categories that have been identified as having a higher risk of non-compliance.

    Considerations include:

    • Whether the relevant building is used as a school or multi-use buildings used for both educational and non-educational activities and application.
    • Application of funds - whether donations receive are applied for the establishment or maintenance of a school building.

    The purpose of this strategy is to obtain a better understanding of the level of compliance of school building funds to help the ATO tailor an engagement approach to help school building funds understand their tax obligations.

    The ATO will share further findings with this group and consult with the group to consider any systematic issues and communication approaches that may be identified.

    A member observed that their DGR clients had received the same questionnaire regardless of the type of DGR category they fall under and that the questionnaire is not tailored to the type of DGR that they are for example; there is no question that asks “are you operating a school?”

    ATO’s NFP client ownership program

    This program continues in 2017, expanded to include an increased number and variety of NFP entities and charities, providing the largest NFP entities the opportunity to discuss significant events as well as technical and service issues one-on-one with the ATO.

    The program is intended to be a service and assurance product to support the largest NFPs, delivered in a way that does not place unnecessary administrative burden on the client and where participation is voluntary for the client. So far, clients have reacted positively and appreciate having a point of contact for tax matters.

    NFP Risk and strategy

    The ATO’s NFP Risk Manager provided an update as follows.

    Private ancillary funds

    Focus areas for 2017–18 include:

    • Checking to see if there are particular advisors common to funds that are pushing the boundaries of compliance.
    • Loan agreements between a fund and its founder(s) or controllers.
    • Scenario where fees and so on eat into the fund corpus and little or no distributions are made.
    • Activities that are of private benefit to the founder(s) or controllers.

    The ATO Chair asked the group if they saw merit in the ATO organising one-on-one conversations with intermediaries that specialise in setting up and administering ancillary funds. The response was that this may be useful but that many ancillary funds are not administered by specialist intermediaries, but rather may be administered by accountants and other advisers for whom this is a very small aspect of their work. It is this group which may need more assistance in order to address any possible compliance issues and so it would be best to target this group in the first instance.

    GST

    The group welcomed ATO representatives from the GST Client Experience and Business Transformation team who presented the findings of a detailed analysis of 364 GST NFP audits with outcomes. The 364 audits were drawn from a pool of 3,721 GST interactions with NFP entities between 2013 and 2016.

    The group heard that:

    • The overwhelming number of areas of non-compliance was as result of:
      • Recordkeeping
      • Property issues including interpretation issues, sale not reported, timing/attribution, no tax invoice provided, margin schemes
      • Incorrect interpretation of the law.
       
    • Most of the non-compliance issues were as a result of a genuine mistake rather than deliberate avoidance.
    • The majority of those responsible for reporting obligations were volunteers with limited experience.
    • The two NFP groups with the most common reporting errors in the sample group were community groups and religious bodies.

    The group discussed the findings and asked the following questions:

    • Are the compliance requirements so complex that entities will inevitably fail?
    • Why are entities getting the same things consistently wrong? Is the law the problem in which case it might never be possible for entities to get it right?
    • How do you get the message through to those that need to know about what is required?

    Action item:

    Due Date:

    Responsibility:

    NFPSG 23 - 17

    Completed

    Secretariat

    The ATO will provide a copy of the GST presentation to members, not for further distribution.

    Action item:

    Due Date:

    Responsibility:

    NFPSG 24 - 17

    March 2018

    NFP Strategy Hub and ATO Indirect Taxes

    A working group will be established to assist the ATO in developing strategies to address GST issues. Updates will be provided at future meetings.

    November 2017 update: This item was delayed while key ATO stakeholders met to better understand the range of GST-related errors made by NFP clients and which categories of NFPs are making these errors. This item will be progressed early in the 2018 calendar year.

    Communication and marketing update

    The ATO Marketing and Communication representative provided a summary of the findings of the ATO commissioned research project called Improving the client experience and engagement with the NFP sector and advised that the full report will be published on ato.gov.au in the near future.

    Action item:

    Due date:

    Responsibility:

    NFPSG 25 - 17

    Completed

    ATO Marketing and Communication

    The ATO will provide information about activities resulting from the ATO’s response to the Improving the client experience and engagement with the NFP sector research paper.

    Other business

    Next meeting: 8 November 2017 Canberra

    Processing of refund of franking credits applications

    Following a number of members raising issues around delays in the processing of refunds of franking credits, the ATO will be checking on the current processes to identify opportunities for improvement.

    Telepresence pilot

    The ATO will trial telepresence technology in 2018 to give members and other attendees the option of ‘telecommuting’ to save on travel expenses. Members and other non-ATO attendees will have the option to attend an ATO office in the following sites (sites based on current membership, other sites could be added if required and if available):

    • Canberra
    • QLD - Brisbane CBD and Townsville
    • VIC - Melbourne CBD (Docklands) and Dandenong
    • Hobart
    • NSW - Sydney CBD and Parramatta

    Action item:

    Due date:

    Responsibility:

    NFPSG 26 - 17

    Completed

    Secretariat

    The ATO will canvas March 2018 meeting dates with the group to lock in Telepresence rooms.

    Contacting the ATO

    Members were reminded that they can raise issues or submit questions to the ATO anytime via the NFP Stewardship Group inbox NFPStewardshipGroup@ato.gov.au

      Last modified: 20 Dec 2017QC 54124