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  • Not-for-profit Stewardship Group minutes 28 February 2019

    Welcome and introductory comments

    The Chair, Deputy Commissioner Tim Dyce, acknowledged the traditional owners and custodians of the land.

    The Chair thanked the members for their attendance and welcomed them to the first meeting to be held by telepresence. He reminded members that the intention of moving to a video conference was to enable members to attend a venue close to their home location and reduce travel costs. The last meeting of the calendar year is scheduled as a face to face meeting, alternating between Sydney and Melbourne, with an expectation that members will attend in person or by proxy. He urged members to provide feedback on this new format.

    Change in ACNC representation

    The Chair alerted the group to the change in ACNC representation and thanked Murray Baird for his longstanding and significant contribution to the group, noting that he will be writing to Murray to thank him. He introduced Mel Yates who leads the ACNC’s Reporting and Red Tape Reduction and Corporate Services area.

    ATO restructure

    The Chair explained the recent realignment in the ATO including the change of Not-for-profit (NFP) Client experience lead. He thanked and acknowledged Assistant Commissioner Kate Roff for her contribution to the group and introduced Assistant Commissioner Jennifer Moltisanti as the new NFP Client Experience Lead. He emphasised that notwithstanding the changes, most of the staff that members will be dealing with will remain the same and that Jennifer Moltisanti will be touching base with group members.

    Consultation Protocol

    The Chair reminded the group of their obligations under the ATO consultation protocol noting that this allows members to be frank in conversations. He emphasized a desire for the group to be as interactive as possible and suggested that speakers with regular updates allocate half their time to the update and half to discussion.

    Action items update - the Chair referred to attachment B of the agenda and noted that all action items from the 28 November 2018 meeting had been completed.

    Confirmation of the 28 November 2018 meeting notes - the record of the meeting was accepted without change.

    ACNC update

    Mel Yates, Director of Reporting, Red Tape Reduction and Corporate Services provided the ACNC update:

    Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017

    Changes to the Corporations ActExternal Link mean that all charities that are companies limited by guarantee will be required to have a whistleblower policy from 1 January 2020. Penalties for failure to have such a policy would mean non-compliance with Governance standard Three, Compliance with Australian laws.

    External Conduct Standards

    Charities that work overseas will be subject to new External Conduct StandardsExternal Link. The commencement date for the External Conduct Standards is unlikely to be 1 July 2019 as (based on the current sitting day calendar) they may still be subject to disallowance at that date.

    Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Act 2018

    Since the last meeting of the group the billExternal Link has passed both houses and received royal assent. Where charities incur expenditure above the disclosure threshold in a financial year for the purpose of influencing the way electors vote in an election, they are subject to the requirements of the Electoral Act. The Australian Electoral Commission (AEC) has recently published guidance specifically for charitiesExternal Link.

    Report from Select Committee into Charity Fundraising in the 21st Century tabled in Parliament

    The committee has released its reportExternal Link. One of the two recommendations is for the Australian Government to commit to working with state and territory governments and the not-for-profit sector to develop a consistent national model for regulating not-for-profit and charitable fundraising, within a timeframe of two years.

    Australian Securities and Investment Commission (ASIC) fees

    ASIC has begun to contact companies limited by guarantee to remind them of their obligation to pay the industry funding levy. A small number of charities have reported that they have received an invoice from ASIC in error. If you believe your organisation should not have received an invoice, please contact ASIC as soon as possible.

    New Charity Portal

    The ACNC’s improved Charity Portal was launched in October 2018 and improvements have been implemented based on feedback. The improved layout makes it easier to find the right form and the portal allows charities to submit enquires directly to the advice team.

    2017 Annual Information Statement (AIS) data

    An analysis of 2017 AIS dataExternal Link is now available on the ACNC website.

    2017 Charities Report

    The 2017 Charities Report is anticipated for an end of April release.

    2018 AIS

    Extra time to lodge – due to the significant information technology changes, charities with a reporting period that ended on either 30 June, 31 July or 31 August 2018 now have until 31 March 2019 to lodge their AIS. Over 11,000 charities (33%) have already submitted their 2018 AIS.

    2019 AIS

    There will only be minor changes to the 2019 AIS (subject to government policy and any streamlined reporting arrangements):

    • A new question will ask charities to supply details of any web or social media presence.
    • Changes to the collection of redacted financial reports (charities will need to supply self-redacted and clean copies).

    Transitional reporting arrangements for Tasmanian associations

    Transitional reporting arrangements for Tasmanian incorporated associations have now ended. This means that from the 2018 reporting period, medium and large Tasmanian charities must now prepare and submit an annual financial report complying with the ACNC’s reporting requirements.

    Streamlined reporting arrangements are now in effect for many charities

    The most recent streamlined reporting arrangements are now in place for

    • NSW – Incorporated Associations (reporting to Fair Trading NSW removed).
    • Victoria - Incorporated Associations (reporting to Consumer Affairs Victoria removed).

    This follows previous arrangement for:

    • ACT – Incorporated Associations and Charitable Fundraisers (reporting to Access Canberra removed).
    • SA – Incorporated Associations) and Charitable Fundraisers (reporting to Consumer and Business Services removed).
    • Tasmania - Incorporated Associations (reporting to Consumer, Building and Occupational Services removed).

    2018 Annual Compliance Report

    The 2018 ACNC Compliance reportExternal Link will be issued soon, it will examine compliance activities for the 2018 year, including:

    • how the ACNC prioritises its compliance work and the types of concerns subject to investigation
    • the ACNC’s compliance focus looking forward.

    2017-18 Regulator performance framework published

    The 2017-18 Regulator performance frameworkExternal Link has been published on the ACNC website.

    New governance toolkit

    The ACNC is creating a governance toolkit; a series of new, specialised resources to help charities manage the governance issues that may arise in four key risk areas:

    • financial abuse
    • working with partners
    • safeguarding, and
    • cyber security.

    Charities are invited to complete a short online survey and share their views. The ACNC will also be conducting face-to-face sessions and telephone interviews later this year.

    Exploring the elements referred to in the ACNCs second object

    The ACNC Act sets out three objects. While the first and third objects are easily understood, the concepts mentioned in the second object are not clarified in the ACNC Act, the Explanatory Memorandum or the Minister's Second Reading Speech. The ACNC Commissioner has released a literature review titled Measures in support of the not-for-profit sector - Indicators of Object 1(b) ACNC ActExternal Link, which proposes how to better understand what a robust, vibrant, independent and innovative sector looks like, and how it can be measured. The ACNC will be consulting with the sector in the next phase of the project. The report can be downloaded from the ACNC website.

    Taxonomy project - Charitable market place

    The ACNC Commissioner’s vision is to improve the search functionality of the Charity Register by introducing a charity specific taxonomy. This would allow charities to list each of their programs, who their programs help and the program location on the ACNC register for donors to make informed decisions. Donors will be able to search for a charity’s programs based on a range of criteria, and will be able to identify like-for-like programs.

    Discussion

    Members noted that some information is difficult to locate on the new website and that many links are broken. Mel advised he will circulate information later on how to report broken links but suggested that as a workaround members use the search function on the website as it now works very well.

    A member suggested that there wasn't much harmonisation regarding the meaning of charity amongst State and Territory Revenue Services and they seem to be defining charity in different ways. The chair suggested that members pass on any concerns to the organisations involved.

    Action item

    NFPSG 1-19

    Due date

    Completed

    Responsibility

    Mel Yates

    Description

    1. Provide a link to previous versions of the ACNC charities report
    2. Advise members on how to report broken links on the ACNC website
    3. Advise members on how to provide feedback on the new Charity Governance Toolkit

    Treasury update

    Treasury provided the group with an update on:

    ATO Law update

    Assistant Commissioner Simon Haines introduced Justin Dearness who provided the ATO Law update:

    Justin also raised for the consideration of members the adequacy of ATO advice on the special conditions contained in Division 50 of the Income Tax Assessment Act 1997 particularly the requirement for an entity to comply with all the substantive requirements in its governing rules. He observed that cases are seen where there is an issue as to whether a rule imposed by a law other than the tax law imposes a substantive or procedural requirement, and raised the question whether the existing ruling advice provided sufficient certainty on this point. He also asked for feedback on what the group is seeing in practice.

    A member asked about the timeframe for finalisation of the two draft rulings. Justin advised that while subject to final clearance processes, the ‘Religious practitioners’ rulings was expected to be published by the end of April 2019 and the ‘In Australia’ ruling was expected to be published by the end of June 2019.

    NFP Tax Concessions Working Group update

    Anne Robinson the chair of the NFP Tax Concessions Working Group provided an update on the group’s work.

    The working group is examining the recommendations contained in the 2013 NFP Sector Tax Concessions Working Group final reportExternal Link many of which are still relevant today. She thanked John Emerson, a member of the group who is retiring in July, adding that he was much appreciated by the group and the sector more broadly.

    She advised that Mark Ferguson from the ATO is now coordinating the group and providing secretariat services.

    The group is working through the report’s 23 recommendations, noting that while some have already been addressed some have not.

    Recommendation number

    Comment

    3 - extend the ATO endorsement framework to all NFPs accessing tax concessions

    Watching brief as it is related to recommendation 24 of the ACNC legislative review

    4 - rewrite the income tax exemption provisions for State and Territory government bodies

    Continue work

    7 - simplify the property donation rules

    Continue work

    8 - remove the public fund requirement

    Continue work as it is broader than what was announced in the DGR reform package

    9 - remove the minimum gift deduction threshold

    Keep a watching brief on this recommendation

    16 - align the minor benefits exemption with the commercial sector

    Retain this recommendation

    18 - improve the ATO guidance on GST and fundraising

    Continue work

    19 - review interaction of GST and National Rental Affordability Scheme (NRAS)

    Continue work

    Anne Robinson advised that the next meeting of the working group will have a focus on Fringe BenefitsTax (FBT). Deputy Commissioner Tim Dyce suggested that the ATO could provide FBT technical expertise to the group if needed.

    Action item

    NFPSG 2-19

    Due date

    Completed

    Responsibility

    Secretariat

    Description

    Arrange for ATO FBT technical experts to assist the Tax Concessions Working Group if needed.

    ATO marketing and communication update

    Dean Villanti and Connie Van Der Velden provided an update on ATO NFP communication and marketing performance (October 2018 to January 2019) and what’s coming up.

    NFP News Service

    The NFP News Service has seen a 28% increase in views since its launch in November 2018. The NFP News Service landing page on the ATO website has been improved to include descriptions and links. The new layout is aligned to best practice and now includes links to the most recent articles and a searchable archive.

    We are working on news service benchmarking metrics to refine the performance measures for articles.

    Social media

    We delivered seven posts across Twitter and LinkedIn. All posts exceeded the Government benchmark for engagement and posts with media links or thought provoking taglines performed best. The how to register for Tax Concessions post was the most popular of the seven posts.

    In the future we will be focusing on building on our social media presence to maximise effectiveness and reach.

    Podcasts

    We released a podcast on Starting a NFP in December 2018 featuring Albert Beric from the ATO and Anna Lyons from Justice Connect. It is currently the best performing ATO podcast and demonstrates the appetite for this type of product.

    We also recently worked on a podcast with the ACNC on tax concessions and are seeking further opportunities to collaborate.

    Webinars

    In November we held a webinar on Ancillary funds that was popular with tax professionals (73% of the 219 attendees).

    We have three new webinars planned for the first half of the 2019 year as follows:

    • FBT in March aimed at new registrants and lodgments
    • school building funds in April
    • animal welfare charities in June.

    Website

    Website performance has been positive and our most visited pages were:

    • claiming tax deductions
    • gift types requirements and valuation rules
    • starting an NFP.

    We are working on developing improved web content on Workplace giving, Checklists and Your Organisation.

    Discussion

    Suggestions from members included:

    • GST and fundraising as a podcast
    • a one page list of podcasts, webinars and other communication products that can be circulated to members.

    Action item

    NFPSG 3-19

    Due date

    Completed

    Responsibility

    Dean Villanti

    Description

    Provide the group with a ‘one pager’ listing key NFP communications activities especially past and future podcasts and webinars.

    Update on Superannuation Guarantee and Ordinary Time Earning issue

    This item focussed on a discussion with respect to concerns raised by the group regarding the ATO view on when annual leave loading is classified as Ordinary Time Earnings (OTE) for Superannuation Guarantee purposes. SGR 2009/2 states that annual leave loading will be OTE unless it is referrable to a lost opportunity to work overtime.

    John McIntosh (Co-chair) previously raised concerns that the ATO’s website previously contained guidance which could have led employers to conclude that annual leave loading is never OTE. As a result there are employers who may not have calculated their SG contributions correctly.

    Ben Murphy, Director Law and Policy Design Superannuation, explained to the group that following an out of session meeting with interested members a written communication had been drafted and included with the agenda, detailing the ATO’s compliance approach for previous periods. He acknowledged that to date our communications on the issue had not been clear and that there was some uncertainty around the issue.

    Members raised a number of concerns regarding the proposed written communication particularly around the lack of clarity regarding the evidentiary requirements for future quarters. It was agreed that further work was required to provide greater clarity and make it more practical and user friendly. It was suggested that we may circulate a confidential draft for feedback. Members also sought further guidance on the potential treatment of employers who were not covered by the communicated compliance approach. The ATO suggested they would consider what further communication they are able to provide for these employers.

    Action item

    NFPSG 4-19

    Due date

    Completed

    Responsibility

    Ben Murphy, Jennifer Moltisanti and interested members.

    Description

    Develop a more tailored paper for members on the Annual Leave Loading for Super Guarantee issue that better meets sector needs.

    NFP Risk and Assurance update

    Risk

    Albert Beric, Director NFP Risk, advised he had recently visited several NFPs and their intermediaries and wished to share the ideas that had come out of those meetings. In the context of making it easier for organisations to understand their obligations and entitlements, Albert sought the group’s views on a number of initiatives, particularly as they relate to organisations with limited resources:

    • additional checklists – He observed that some NFP organisations that have been around for a long time may have lost some of their corporate knowledge and are relying on outdated information. He suggested that we may be able to develop additional checklists that complement our tax rulings, especially for some DGRs.
    • improve the DGR web content to make it more easily understood.
    • additional model deeds or standard wording for governing rules - He noted that some NFPs, for example School Building Funds, don’t have the resources for professional advice at start up and questioned whether the ATO could do more for them. We currently provide model trust deeds for ancillary funds and sample non-for-profit clauses and asked if we could do more.
    • practical guidance on winding up.
    • some intermediaries had asked whether the ATO could provide a list of item one DGRs that ancillary funds can distribute to. They also felt that there was inadequate guidance on the portability of Private Ancillary Funds.

    Discussion

    Members commented that:

    • additional checklists were a good idea and that practical application is important
    • it was essential to understand the problem being addressed and that what is developed is fit for purpose
    • we should ensure that issues beyond the obvious are targeted.

    Discussion on additional model deeds or standard wording for governing rules centred on the complexity of doing this as deeds or governing rules need to account for a range of law and regulation, not just tax issues. It was noted that other organisations such as Justice Connect have a range of related material available on their website.

    Assistant Commissioner Jennifer Moltisanti added that in her previous role a Small business wind-up checklist and she would see if it could be used to develop something for NFPs.

    Engagement and Assurance

    Jacinta Lawson, Acting Director of NFP Engagement and Assurance Services, provided an update on ATO engagement activities noting that the current focus areas include:

    • Private Ancillary Funds.
    • Organisations self-assessing as income tax exempt.
    • High risk refund of franking credit cases - preliminary work on the proposed push assessment pilot for NFPs. Jacinta observed that while automation may be one solution for compliance, it is not the end but is part of a journey which involves working through the best ways to encourage willing participation. This may also involve audit or advice, or a combination of the two, for example webinar content based on audit experience.

    Jacinta also noted involvement in work with the ACNC around the Financial Action Task Force (FATF) and had participated in a mock interview with the Department of Home Affairs and Austrac.

    Action item

    NFPSG 8-19

    Due date

    Completed

    Responsibility

    Jennifer Moltisanti

    Description

    Review the small business wind up checklist to see if it could assist with the development of an NFP wind up checklist.

    NFP Client Experience update

    Alison Zeitlhofer, Director NFP Client Experience, provided an update on recent activities designed to improve the experience of NFPs interacting with the ATO.

    Refunds of Franking Credits for NFPs

    We are exploring an opportunity to run a pilot project trialling push assessments for refunds of franking credits for NFPs. Organisations participating in the trial would not be required to lodge an application for a refund but instead would have refund/s deposited directly into their bank accounts based on third party data. The initiative would build on a pilot project previously run for individuals.

    Client Visit Program

    The NFP client experience team have recently been conducting a series of visits to NFPs and intermediaries to better understand their interactions with the ATO and to identify areas requiring improvement. We are working on a number of improvements to our website, including additional checklists that were suggested at these visits.

    NFP Welcome Letter

    We are looking at sending a welcome letter to ABN registrants who have self-identified as being NFP organisations. The letter will contain links to basic information that may be useful to NFPs. We will be providing a copy of the draft letter to the group for comment.

    National Tax Clinic Program Trial

    Ten universities across the country will operate Tax Clinics on a trial basis during 2019 to advise and support low income or vulnerable individuals and small businesses that may not be able to afford professional advice and representation. The assistance will be provided on a pro bono basis by university student volunteers undertaking relevant studies. The volunteers will be trained and supervised by qualified clinic managers. We are exploring whether we can include NFP advice in these tax clinics. Feedback has been positive so far.

    Single Touch Payroll (STP)

    The bill extending STP reporting to organisations with less than 20 employees from 1 July 2019 has passed parliament and is awaiting royal assent. Members were asked whether they would like an out of session briefing on STP.

    Action item

    NFPSG 5-19

    Due date

    Completed

    Responsibility

    Alison Zeitlhofer

    Description

    Provide clarity on STP impacts on the NFP sector, particularly on large religious organisations

     

    Action item

    NFPSG 6-19

    Due date

    Completed

    Responsibility

    Members

    Description

    Provide feedback on the:

    • proposed Refund of franking credits pilot, and
    • NFP welcome letter.

     

    Action item

    NFPSG 7-19

    Due date

    Completed

    Responsibility

    Amanda Spinks

    Description

    Provide information on the upcoming seminar on Fringe Benefits Tax for NFPs, Secretariat to distribute.

     

    Action item

    NFPSG 9-19

    Due date

    Completed

    Responsibility

    Secretariat

    Description

    Distribute link to the Good governance principles and guidance for not-for-profit organisationsExternal Link on the Australian Institute of Company Directors website.

    Wrap up and other business

    Deputy Commissioner Tim Dyce noted that the Australian Institute of Company Directors (AICD) had recently published a guide to good governance for NFPs that is compelling reading. Phil Butler from the AICD advised that it provided good governance principals for different sized organisations and relevant to many different sectors. It includes practical guidance and case studies.

    Deputy Commissioner Tim Dyce thanked members for their participation and reminded them that we are seeking feedback on the form of the meeting.

    There was no other business.

    Next meeting: 7 August.

    Attendees

    Attendees are listed below.

    Organisation

    Members

    ATO

    Tim Dyce (Co-chair), Deputy Commissioner, Private Wealth, and NFP Client Experience Owner

    ATO

    Albert Beric, Director, NFP Risk and Policy

    ATO

    Alison Zeitlhofer, Director, NFP Client Experience and Partner Relationships

    ATO

    Ben Murphy, Director, Law and Policy Design, Superannuation

    ATO

    Dean Villanti, Assistant Director, Marketing and Communications Large Business and NFP Audiences

    ATO

    Gess Sottile, Assistant Director, NFP Client Experience and Partner Relationships

    ATO

    Jacinta Lawson, Acting Compliance Director, NFP Engagement and Assurance Services

    ATO

    Jennifer Moltisanti, Assistant Commissioner, Private Wealth, and NFP Client Experience Lead

    ATO

    Judy Hancock, Project Manager, DGR Reform

    ATO

    Justin Dearness, Acting Assistant Commissioner, Tax Counsel Network

    ATO

    Melissa Dimitrovska, Client Engagement Officer, NFP Engagement and Assurance Services

    ATO

    Michael Barilla , Operations Manager, NFP Advice

    ATO

    Rowan Fox, Assistant Commissioner, Law and Policy Design, Policy Analysis and Legislation

    ATO

    Simon Haines, Assistant Commissioner, Tax Counsel Network

    Australian Charities and Not-for-profits-Commission (ACNC)

    Mel Yates, Director, Reporting and Red Tape Reduction and Corporate Services

    Australian Institute of Company Directors (AICD)

    Phil Butler, NFP Sector Leader

    Catholic Social Services Australia

    Joe Zabar, Director Strategic Policy and Engagement

    Centre for Social Impact, Swinburne University of Technology

    Krystian Seibert, Industry Fellow

    Clubs Australia

    Anthony Trimarchi, Manager of Policy and Government

    Community Council for Australia

    David Crosbie, CEO

    CPA Australia

    Ram Subramanian, Policy Adviser

    Ernst & Young

    Amanda Spinks, Director of Employment Taxes

    Giuntabell Pty Ltd

    Nunzio Giunta, CPA, Managing Director

    Justice Connect

    Juanita Pope, Head of Not-for-profit Law

    Law Council of Australia

    Alice MacDougall, Deputy chair of the Law Council Charity and NFP Law Committee (for Jennifer Batrouney QC)

    Philanthropy Australia

    Sarah Wickham, Manager Policy and Research

    PricewaterhouseCoopers

    Judy Sullivan, Partner, Tax and Legal, National Leader, Charities and Not-for-profit Practice

    Prolegis Lawyers

    Anne Robinson, Partner

    Salvation Army

    John McIntosh (Co-chair), National Tax Adviser

    Scouts

    Ashley Selwood, CFO, Queensland Branch

    The Tax Institute

    Simon Bowden, Special Counsel, Clayton Utz

    Treasury

    Nick Berger-Thomson, Senior Adviser

    University of NSW Business School

    Dr Fiona Martin, Professor, Taxation and Business Law

    Apologies

    Apologies are listed below.

    Organisation

    Members

    ATO

    Mark Ferguson, Manager, NFP Policy and Law

    Arnold Bloch Leibler

    Joey Borensztajn, Partner

    Treasury

    Jacky Rowbotham, Principal Advisor

      Last modified: 25 Jul 2019QC 59754