Show download pdf controls
  • Not-for-profit Stewardship Group minutes 8 November 2017

    Welcome and introduction

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

    The ATO co-chair then welcomed Second Commissioner Andrew Mills to the meeting by telepresence, Andrew provided an update to the group with key points including:

    • The ATO recognises its clients belong to multiple segments and that it is important to get things right, to identify the right issues, communicate and engage with the right people at the right time.
    • Members of this group are connected to the community and the ATO needs their help to connect in better ways with not-for-profit organisations (NFPs).
    • The ATO needs the help of groups like this one to know what is going right and what is going wrong.
    • The ATO’s Reinvention journey is ongoing to implement the vision to improve the client experience and embed the right cultural traits in ATO staff to help do this.
    • The ATO Corporate plan 2017–18 is now available and shows the continual improvements being made.
    • The ATO recognises the need to ensure confidence in the system and the need to ensure that any changes in the way the ATO operates do not have a negative impact on clients.

    Attendees were invited by Andrew to ask questions. Comments from external members included:

    • That concept of the Australian Charities and Not-for-profits Commission (ACNC) regulating all NFPs should still be on the government’s agenda in its review of the operation of the ACNC.
    • It is important to make sure that NFPs are getting the concessions that they are entitled to.
    • Policy around advocacy needs to be clarified and settled.

    The ATO response included the following key points:

    • The ATO works collaboratively with the ACNC more and more.
    • The ATO recognises that tax and super laws sometimes add to the regulatory burden on NFPs and it is working to mitigate this where it can.

    The record of the Not-for-profit Stewardship Group minutes 19 July 2017 was confirmed.

    Change in ATO NFP team structure and 2018 focus areas and priorities

    Changes to the ATO NFP team structure

    Tim Dyce, the ATO co-chair introduced Assistant Commissioner Kate Roff to the meeting, Kate reports to Tim and is the ATO’s new NFP Client Experience Lead. Along with this new role, Kate is now also the Assistant Commissioner with responsibility for the ATO’s NFP team as well as the NFP call centre and interpretive guidance team. This change now aligns some key NFP client experience teams with the ATO co-chair as the ATO’s NFP Client Experience Owner.

    Some other key stakeholders such as the ATO’s Marketing and Communications NFP audience team, Engagement and Assurance NFP specialists and NFP technical advice specialists remain separate as the ATO policy in relation to those teams is to provide services corporately, across the ATO. The NFP team continues to work closely with these areas.

    Rod Walker explained that the ATO’s NFP team’s key objectives are to:

    • make it as easy as possible for NFPs to access tax concessions and to meet their tax obligations (including income tax, GST, FBT, PAYGW, Super) so that they can get on with performing their important work, and
    • encourage willing participation in the tax and super systems by building trust, fairness and integrity in these systems for NFPs.

    Kate noted that her experience so far is that the ATO’s NFP teams are committed and passionate about making a difference for NFPs.

    Members particularly expressed their appreciation of the very professional work of the staff in the NFP call centre and interpretive guidance teams.

    2018 focus areas and priorities

    The ATO co-chair noted that the ATO has a priority list of changes it is working through to help improve the NFP client experience and has consulted with this group and other NFP representatives about proposed changes including for example, the changes made in response to ABR issues raised by members and the work done to seek changes to Division 50–50 of the Income Tax Assessment Act 1997.

    However, the ATO needs to ensure that it is not just treating the pain points or symptoms but that it understands the root cause of negative client experiences and addresses these.

    The Community co-chair suggested that the ATO ask itself if there are perennial issues that may indicate that the law is problematic; where no matter what solutions the ATO implements, the issues continue to arise. That sometimes a permanent solution requires a legislative fix.

    The ATO chair responded that the ATO needs to challenge itself more about what the true parameters of the tax and super laws are; to ensure that all possibilities have been explored in regard to application of the law as it stands before advocating for law change. However, as evidenced by the work of the Division 50–50 working group there are times when other solutions are exhausted and it is clear that advice to government about a law change proposal needs to be considered.

    Communication and marketing update

    The ATO provided an overview of what action it is taking in response to the findings of the ATO commissioned EY Sweeney research project.

    ATO services

    • Although there is high satisfaction with ATO services for NFPs generally, awareness and further promotion of the dedicated NFP service through third-party channels and the NFP phone line will be progressed.
    • Improve the NFP News Service platform – then undertake a subscription drive.
    • Identifying key areas in the NFP life cycle and publish related articles in a timely manner.
    • Increase participation at events as well as seek increased speaking opportunities at specific NFP segment specific events, for example religious - Interfaith Summit, December 2017.
    • Pilot an ATO NFP Roadshow targeting a cross section of the sector to provide taxation advice and promote the ATO.
    • Webinars/video tutorials – interactive online seminars and video tutorials on topics of interest to NFPs.
    • Promote online self-service tools and tax calculators to access binding advice or guidance 24/7.
    • Continue to improve the website with secondary content review, easier navigation and functionality. Provide more tailored and individualised information.
    • Promote Alex (online virtual assistant that helps answer non-complex tax questions) through a variety of channels.

    Industry partnerships

    • Increase effective engagement with the sector by building new partnerships and leveraging opportunities to communicate key messages.
    • Continue to partner with external stakeholders such as the ACNC, key associations and organisations such as Justice Connect and Pro Bono Australia to increase cross promotion of ATO messaging and help build integrity for the sector.
    • Work closely with the Not-For-Profit Stewardship Group and NFP Communication and Engagement Working Group to identify communication gaps and gain feedback on products and services.

    Obligations and entitlements

    • Providing further information through a variety of channels would assist NFPs in improving reporting and remaining compliant.
    • Inform NFP sector of legislative changes and explain impacts to help them meet their obligations and make sure they are aware of their entitlements.
    • Communicate what the ATO is doing to address non-compliant behaviour in the NFP sector.

    Discussion followed with key points including:

    • The ATO needs to know where NFPs and those that work with them go for help, to better target information.
    • The ATO should ask itself how it can cut through with key messages to NFPs, taking into consideration that some are yet to go digital, consider all channels including radio if possible.
    • Knowledge about the lifecycle of NFPs would help the ATO understand who needs to know what and when.
    • NFPs that are not members of a peak body often miss out on information; a different strategy is needed for this group – in contrast to sending messages out to members of peak bodies.
    • The ACNC town hall events are very popular.

    ACNC update

    The ACNC’s acting Commissioner for the month of November 2017, Murray Baird, provided an update as follows:

    • An MP Charity Toolkit has launched, MP Charity Register – ACNCExternal Link. The purpose of the MP Charity Toolkit is two-fold:
      • to help Federal MPs and their staff search for, and engage with, local charities
      • to provide useful and succinct information to help MPs and their staff understand some of the current issues facing registered charities
       
    • The Australian Charities and Not-for-profits Commission Annual Report 2016–17External Link was tabled in Parliament on Friday 27 October 2017.
    • In the last week of October 2017 the ACNC faced the Economics Legislation Committee and there was noted interest in the role of charities in advocacy which provided an opportunity to talk about the ACNC guidance entitled Charities, elections and advocacyExternal Link. In short, the guidance outlines that charities are able to advocate on issues relevant to their charitable purposes – but must avoid a purpose of supporting or opposing a political party or a candidate for political office or any illegal purpose.
    • The outcomes of Australia's National risk assessment into the NPO sectorExternal Link conducted jointly by AUSTRAC and ACNC is available.
    • The ACNC continues to work with the states and territories to work towards harmonisation of reporting (especially fundraising reporting), the sharing of charity data and cutting red-tape.
    • A new factsheet has issued that explains changes for registrable Australian bodies that are registered with the ACNC, Murray noted that the ASIC Register may not be current for charities that are also registered with the ACNC and that the factsheet advises that charities check the ACNC Register for the details of charities as this information will be updated over time. Factsheet - Registrable Australian bodies and the ACNCExternal Link

    It was noted by members that ASIC reporting is an extra layer of reporting for NFPs and that company secretaries have no authority per se with the ACNC which makes compliance difficult.

    Treasury update

    Treasury provided an update to the group about the Tax Deductible Gift Recipient Reform OpportunitiesExternal Link discussion paper consultation and advised that as of the date of this meeting, no government response had been announced. Treasury explained to the group the next steps and will continue to consult with this group.

    Workshop session

    ATO response to the submission made in relation to question 23 of the FBT return

    Members were provided with a briefing paper ahead of the meeting and the ATO’s Assistant Commissioner, Anna Longley addressed the meeting by telepresence to discuss the ATO’s response to issues raised by a member and recorded in Action Item NFPSG 13–17.

    Background

    In essence, the issue is that NFPs that are exempt employers for FBT purposes find that they are required to report details of fringe benefits for all their employees if they exceed the FBT exemption cap for even only one employee. If the FBT exemption cap is not exceeded for any employees, the employer is not required to lodge an FBT return at all.

    ATO response

    The ATO explained that following research into the purpose of question 23 of the FBT return and consultation with key stakeholders the ATO has reached the view that no changes will be made to question 23. The reasons provided were that:

    • Removing the requirement to complete question 23 for NFPs would result in a significant loss of data that the ATO and Treasury rely on for reporting, analysis and Budget transparency purposes. This data is highly useful for the development of policy, although the ATO concedes that the data is imperfect.
    • Without a corresponding change in record keeping requirements to substantiate statements made on the FBT return, it is anticipated that there would be little to no benefit to taxpayers in terms of a reduction in the compliance burden imposed by question 23.
    • Removing the question 23 requirement could inadvertently lead to exempt employers reducing their compliance with the record keeping and valuation obligations in relation to specific benefit types imposed by the Fringe Benefits Tax Assessment Act 1986 (FBTAA) – the potential need to provide this information in the return is an important impetus for employers to maintain the records required to ensure correct categorisation and valuation of benefits to determine the correct FBT liability.

    Discussion

    • The requirement to report for all employees even if only some are over the cap adds to the compliance burden for NFPs that does not have a direct relation to the calculation of a tax liability.
    • There is concern among members that, because not all NFP employers are required to report, the data is flawed and may be misinforming policy makers.
    • There is concern among members that the majority of FBT returns prepared by NFPs are incorrect because they don’t understand the nuances of the requirements.

    Suggestions

    • Perhaps the ATO could only ask for details for those employees over the FBT exemption cap.
    • The ATO should develop an education program for NFPs who provide fringe benefits.
    • The ATO’s co-chair agreed that the ATO needs to find practical outcomes for NFPs in scenarios like this one and to challenge the status quo.
    • The ATO’s co-chair agreed that in this case, the ATO needs to consider more closely how useful the FBT data collected from FBT exempt NFP employers is to government in its current state.
    • The ATO undertook to provide an update at the March 2018 meeting.

    ATO update on the review of GST benchmark market values

    Director, Bronlynn Graham from the ATO addressed the meeting by telepresence to provide an update on the ATO’s review of GST benchmark market values.

    Background

    • Accommodation supplied by an endorsed charity or gift-deductible entity is GST-free if the consideration received for the supply of the accommodation is less than 75% of market value including GST.
    • The weekly accommodation rates in GST and non-commercial rules – benchmark market values, including Table 5: Long-term accommodation – weekly figures are provided to assist those in the industry. The current published benchmark market values in Table 5 of the Guide are based on the Temporary accommodation – rent ceilings (non-SES) in the APSC accommodation rates.
    • Internal review and feedback from key industry stakeholders is that the benchmarks based on APSC data are not a good reflection of market values or median rent.

    Feedback received

    • The APSC data currently used is too broad as it does not breakdown into various city zones and the ATO has no information on how the rates used are determined.
    • Feedback from industry stakeholders indicated a preference for market rents based on more detailed locality/zones, per number of bedrooms and per dwelling type. The ATO agrees that this data would provide more meaningful benchmark market rents.
    • Freely available data available from state and territory websites and external commercial websites does not provide consistent or complete data to be able to provide benchmark markets rates as preferred.
    • ATO has sought quotes from various external commercial providers to provide appropriate data. The data the ATO was seeking quotes on is median weekly rents broken into:
      • categories/zones based on local eg. Inner city / outer suburbs and major regional centres
      • type of dwelling
      • number of bedrooms.
       
    • Initial responses from external commercial providers is that the providing forecasts of the data being sought 12-18 months into the future would be problematic and expensive as it is not something that is currently done.

    Discussion

    • The ATO noted that the proposal is that past decisions made by NFPs would be protected if they were in line with the policy at the time they were made, no retrospective application of new approach.
    • Members noted that some organisations will hurt if no change is made and some will hurt if changes are made to the current approach. This needs to be managed.
    • The ATO should consider how any change to the guidance provided by the ATO would impact on commercial decisions made or being considered by NFPs.
    • Members noted that NFPs would expect that the benchmark market values would either stay the same or go up.
    • Any proposed transition period from the current guidelines to any new approach would need to be sufficiently long to allow NFPs to transition properly.

    Outcomes

    There is more for the ATO to consider than originally thought.

    The ATO needs to be clear about what the problem is and what possible options/solutions can be considered.

    The ATO undertook to provide an update at the March 2018 meeting.

    Discussion about Behavioural Economics Team of the Australian Government (BETA)External Link Interagency Giving Projects

    Background

    In partnership with the Department of Social Services (DSS), BETA is undertaking three research projects over the next three years to 2019-20 to test the potential for behavioural ‘nudges’ to be used to encourage additional planned giving. These projects will involve designing behaviourally-informed interventions and testing those interventions using randomised control trials.

    The three behavioural projects will assess the effectiveness of behavioural economics approaches in increasing additional planned giving, including:

    Project 1: Encouraging greater take up of workplace giving in the Commonwealth public sector

    Project 2: Potential to use Australian Taxation Office (ATO) communications to nudge individual tax payers and employers to undertake more planned giving, including workplace giving.

    Project 3: Increasing charitable bequests included in Australian’s wills.

    There have been some conversations with the ATO to discuss ways of supporting the projects.

    Discussion

    • The ATO appears reluctant to participate in some aspects of the projects.
    • ATO could publish targeted messages at appropriate times for example; approaching tax time the messaging could be about how to record donations and how to claim deductions.
    • There is a sense in the ATO that any messaging directly to individual taxpayers comparing their giving to the average may result in negative public reactions. There are also other government and community sensitivities that mean that the ATO needs to walk a fine line with how it contributes to promoting giving.
    • Intermediaries that prepare tax returns would be a good group to target for messaging about giving.
    • It was noted that research shows that the mid-point of annual donations by individuals is $100, it would be worth investigating why it is $100.
    • It was noted that patterns and methods of giving are changing.

    Updating the Taxpayers' Charter

    The ATO has been consulting on the possible updating of the Taxpayers’ Charter Updating the Taxpayers’ CharterExternal Link and is now approaching all stewardship groups to discuss this work and seek feedback. This consultation follows from a review by the Inspector General of Taxation (the IGT) into the Taxpayers’ Charter and Taxpayer Protections in December 2016. The IGT’s full report is available on the IGTExternal Link website. The review covered four ‘themes’, including ‘The framework for taxpayer rights and protections – The Taxpayers’ Charter’.

    Suggestions: The review team should consider reaching out to disability groups for their thoughts.

    See also:

    ATO law and policy update

    The ATO Chair welcomed Assistant Commissioner, Simon Haines to the meeting and explained that Simon has replaced Assistant Commissioner, Ilana Millar. Ilana contributed to this group for a number of years and has now moved to head up the ATO’s Public Groups and International objections area.

    Review of public advice update

    • The review of TR 95/27 Income tax: public funds is on hold pending the government’s deliberation of the consultation on the Tax Deductible Gift Recipient Reform OpportunitiesExternal Link discussion paper.
    • Consultation on TR 92/17 Income tax and fringe benefits tax: exemptions for ‘religious institutions’ are ongoing with the ATO seeking to connect with a more diverse group of religious representatives.
    • Consultation on TR 97/22 Income tax: exempt sporting clubs with additional clubs sector representatives will commence early in the 2018 calendar year.

    Risk and assurance update

    GST

    ATO representatives from the GST Client Experience & Business Transformation Team addressed the meeting by telepresence with a follow on from the presentation provided to the group at the July 2017 meeting. The main points were that:

    • Further research into the results of NFP GST audits (with outcomes) since 2013 does not reveal any particular issues caused by the current law that is, there is no indication of a need for law fixes in this area however, if members are aware of issues, the ATO is open to discussing them.
    • Sixty percent of GST audits (with outcomes) were almost evenly spread between community groups and religious groups. These groups were primarily staffed by volunteers who generally lacked awareness of their responsibilities.
    • The staff and volunteers working for many of the NFPs subject to GST audits (with outcomes) lacked digital capability, including no IT equipment, and a lack of IT expertise to utilise online resources.
    • Some NFPs still believe that as they are an NFP they have no tax obligations.
    • In almost all cases, the NFP did not engage a tax agent.

    Examples of problems found:

    • Net GST shortfall showing in the millions. Volunteer bookkeeper:
      • keyed extra zeros on the BAS data
      • claimed imputation credits on acquisition of residential residence in the belief that it would qualify as a church.
      • The organisation had not sought advice or help prior to lodgment.
       
    • Net GST shortfall of $7,000. Grants not classified as taxable supplies and instead treated as donations.
    • Sale of land/property treated as GST free when in fact taxable. Consequences can be severe in terms of financial impact when corrected for example, when the shortfall has been spent.
    • Lack of understanding when English is a second language
    • Net GST shortfall of $5,000. Issues relating to classification of sales and claiming imputation credits for overseas travel expenditure.
    • Net GST shortfall $34,000. Inexperience and limited capabilities resulting in poor record keeping and lack of understanding of GST reporting requirements. Classification errors relating to memberships, donations, and duplication of imputation credits claims.

    Discussion

    • Members agreed that many NFPs don’t know about all their obligations and suggested that the ATO collect data about the types of NFPs calling the ATO and the types of questions they ask or the type of information they are looking for. If this data is collected, some analysis can be done to understand better what information to provide to whom.
    • A member asked whether penalties are imposed in these cases and the ATO responded that because these cases mostly fall into the category of inadvertent mistakes, it is rare for the ATO to impose penalties. Interest is remitted to the base rate for the majority of clients and the ATO tends to take a sympathetic approach to NFP clients in these cases.
    • The ATO needs to make a clear statement to NFPs about penalties in these types of cases because NFPs that are subject to an audit panic at the thought of being penalised for mistakes.
    • The ATO should promote the information it has available for NFPs including the Induction package for not-for-profit administrators

    NFP Client engagement and assurance

    The ATO’s NFP Client engagement and assurance Director referred to the ATO’s 2016-17 Annual Report summarising the content relevant to NFPs (NFP content is at pages 46-48 of the report).

    NFP Risk and Strategy

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

    • The updated Model Trust Deed for ancillary funds is almost ready to issue.
    • Preparations are being made to pilot a Public Ancillary Funds Intermediaries engagement strategy early in the 2018 calendar year. The proposal is to engage with intermediaries that have ancillary fund clients about their experience with the tax system and any issues they may have.
    • The ATO will consult with this group and other relevant representatives following this meeting with a draft practice statement on the subject of Administration of discretion to reduce the minimum annual distribution rate for ancillary funds
    • The ATO is making contact with ancillary funds that appear to have net assets less than the amount prescribed by the ancillary fund guidelines to discuss options with them.
    • The ATO is contacting non-main role ancillary funds to discuss options in an attempt to ensure that integrity of ancillary fund data

    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

    Attendees

    Organisation

    Members

    ACNC

    Murray Baird, Assistant Commissioner and General Counsel

    Australian Centre for Philanthropy and Nonprofit Studies, QUT

     

    Prof. Myles McGregor-Lowndes, 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

    Giuntabell

    Nunzio Giunta CPA, Managing Director

    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, Not-for-profit Law

    Philanthropy Australia

    Krystian Seibert, Manager Policy & Research

    Prolegis Lawyers

    Anne Robinson

    Salvation Army

    John McIntosh, Charities Tax Advisory Service

    Tax Institute

    Michelle Hartman, Partner, Deloitte Touche Tohmatsu

    Department of Social Services

    Kym McConnell (Interagency Giving Projects, Item 6)

    Treasury

    Murray Crowe, Susan Bultitude

    ATO

    Second Commissioner Law Design and Practice

    Andrew Mills (by Telepresence)

    Deputy Commissioner and NFP Client Experience Owner

    Tim Dyce

    Assistant Commissioner

    NFP experience lead

    Kate Roff

    Senior Director NFP Strategy and Client Experience

    Rod Walker

    Director NFP Risk and Policy

    Albert Beric

    Manager NFP Policy & Law

    Mark Ferguson

    Assistant Commissioner, Tax Counsel Network

    Simon Haines

    Acting Assistant Commissioner ATO Corporate External Engagement and Governance

    Janine Clark

    Assistant Commissioner Technical Excellence Services (FBT)

    Anna Longley (by Telepresence)

    Compliance Director, Engagement & Assurance Services

    Iris Sin (by Telepresence)

    Senior Director, Indirect Tax (GST)

    John Birkett/Mark Weber (by Telepresence)

    Director, GST Technical Product Leadership

    Bronlynn Graham (by Telepresence)

    Director Marketing and Communications Government and Not-for-Profit audiences

    Rebecca Webb-Johnson

    Secretariat, ATO NFP Strategy Team, NFP Reinvention

    Gess Sottile

    Apologies

    Organisation

    Members

    Arts Law Centre

    Robyn Ayres, Executive Director

    Law Council of Australia

    Jennifer Batrouney QC, Chair of the Law Council’s NFP Legal Practice and Charities Committee

      Last modified: 11 Jul 2018QC 56227