Not-for-profits and the Common Reporting Standard
Many not-for-profit (NFP) organisations will be impacted by the Common Reporting Standard (CRS).
The CRS is the single global standard for the collection, reporting and exchange of financial account information on foreign tax residents on an annual basis.
The CRS requires Financial Institutions to collect and report Financial Account information on foreign tax residents (Reportable Accounts). Under the CRS some NFPs will be Financial Institutions and may have obligations to report to us. NFPs could be Financial Institutions by either having managed investments or by conducting an investment business.
Even if your NFP is not a Financial Institution it may be asked by other entities for self-certification. Self-certification will require a Financial Institution to ask all new (and some existing) Financial Account holders a series of questions about their residence and entity status for tax purposes. Where a self-certification shows that an Account Holder is from a foreign jurisdiction, the Financial Account will have to be reported to us.
Find out about:
The following flow charts will help you determine if you have reporting obligations under the CRS:
See also:
Common Reporting Standard flow chart
Not-for-profits (NFPs) that are Financial Institutions for Common Reporting Standard (CRS) purposes may need to report to us.
Follow these steps to help you determine if you need to report to us.
Step 1: Is your NFP a Financial Institution for the purpose of the CRS?
To work out if your NFP is a Financial Institution for this year:
- go to the Financial Institution flow chart
- then return to this step.
Yes
|
If your NFP is a Financial Institution go to Step 2
|
No
|
Your NFP is not a Financial Institution and will not have to report to us in regards to the CRS. You may still need to provide self-certification if requested by a Financial Institution.
|
Step 2: Do you have Account Holders who hold a Financial Account?
Account Holders are those who have debt and/or equity interests in your NFP throughout a calendar year. You may have more than one Account Holder and you should record each Account Holder for your future reference as you may need to report these to us at the end of the reporting period.
Go to the Account Holder flow chart to work out if you have Account Holders who hold a Financial Account then return to this step.
After going through Step 2, irrespective of whether you do or do not have Financial Accounts, you will need to review any new accounts to determine if they are Financial Accounts for the purposes of CRS. For each new account that you create you should complete the Account Holder flow chart. If you determine that a new account is a Financial Account you may have reporting obligations at the end of the reporting period.
Yes
|
If yes, the first reporting period is from 1 July 2017 to 31 December 2017. You will have to do due diligence on Account Holders that you have identified for a reporting period.
|
No
|
You currently do not need to report to us. From 1 July 2017 as new accounts are created you will need to evaluate those accounts to determine whether they are Financial Accounts and whether due diligence is required.
|
Financial Institution flow chart
NFPs could be a Financial Institution by either having managed investments or by conducting an investment business.
Part 1: Where an NFP has managed investments
To be a managed Financial Institution, 50% or more of an NFP’s gross income (including grants and donations) in the last three calendar years must be derived from investments (such as shares, money, portfolios) and at least some of the NFP’s assets are managed by an external investment manager. To determine this, add up your gross income for the relevant time period and calculate the proportion from investments.
An NFP is considered to be managed by an external investment manager if the external investment manager invests on behalf of the NFP and has discretionary authority over at least some of the NFP’s assets. An external investment manager will have discretionary authority if they can make decisions regarding the investment of at least some of the assets without seeking approval from the NFP.
Example: NFP investment income
The Whitely Trust (the Trust) is a charity. Over the last three years its gross income was 30% from financial investments, and 70% from donations and grants. The Trust’s financial investments are managed by a fund manager.
The Trust does not meet the definition of Financial Institution as less than 50% of its income is from financial investments.
End of exampleStep 1 – Gross income from investments
In the past three calendar years or for the life of your NFP (whichever is shorter), has 50% or more of your gross income (including grants and donations) been from investments?
Note: Investment income includes interest, dividends and any other income from securities or commodities. If more than 50% of your income comes from investing, reinvesting or trading investments as a business then the answer to this question is no. Rental income is not included as investment income for the purposes of the CRS.
Yes
|
Go to Step 2
|
No
|
Go to Part 2
|
Step 2 – Another entity conducts certain activities or operations on your behalf
Does another entity conduct the following activities or operations on behalf of your NFP:
- trading in money market instruments
- trading in foreign exchange, exchange, interest rate and index instruments
- trading in transferrable securities
- commodities futures trading
- individual and collective portfolio management
- otherwise investing, administering or managing Financial Assets or money?
Note: The entity conducting the activities or operations on behalf of your NFP only needs to manage a portion of your NFP's Financial Assets. This portion can be any amount and does not need to be greater than 50% of the Financial Assets.
Financial Assets for the purposes of the CRS include the following assets or interests in those assets:
- securities
- commodities
- swaps
- insurance or annuity contracts.
Step 3 – Investment management activities
Are all of the investment management activities described in the above question conducted by a sole trader or an individual not conducting a business?
Step 4 – External investment manager
Does the external investment manager have discretionary authority over at least some your NFP’s assets?
Part 2: Where an NFP is conducting a business as a Financial Institution
For an NFP to be a Financial Institution by conducting an investment business, 50% or more of the NFP's gross income (including grants and donations) in the last three calendar years must be derived from conducting an investing, reinvesting or trading business. To determine this, add up your gross income for the relevant time period(s) and calculate the proportion from your investing, reinvesting or trading activities.
Example 1
The Church Property Trust (the Trust) is a charity that was established in 1822. In the last three years, 55% of the Trusts gross income has come from carrying on a financial investment business for a church and 45% from rental income, donations and grants. The Trust is a Financial Institution as more than 50% of its income is from its financial investment activities.
Example 2
Larkham Limited (the Company) is a not-for-profit sporting organisation that was formed on 1 January 2016. In the 2016 calendar year 75% of the gross income of the company came from membership fees, donations and government grants. 25% of its income was derived from investments. The Company is not a Financial Institution as less than 50% of its income is from financial investments.
End of exampleStep 5 – Conducting a business as a Financial Institution
Does your NFP conduct an investing, reinvesting or trading business undertaking any of the following activities or operations:
- trading in money market instruments
- trading in foreign exchange, exchange, interest rate and index instruments
- trading in transferrable securities
- commodities futures trading
- individual and collective portfolio management
- otherwise investing, administering or managing Financial Assets or money?
Note: Financial Assets for the purposes of the CRS include the following assets or interests in those assets:
- securities
- commodities
- swaps
- insurance or annuity contracts.
Step 6 – Gross income from investments
In the past three calendar years or for the life of your NFP, whichever is shorter, has 50% or more of your gross income (including grants and donations) been from conducting its investing, reinvesting or trading business?
Account Holder flow chart
A Financial Institution is required to determine if it has any Financial Accounts. Financial Accounts for CRS purposes has a special meaning. Under the CRS Financial Accounts are debt and equity interests in the NFP. Financial Accounts are held by Account Holders. The structure of your NFP will have an impact on who your Account Holders are. Each time you determine you have an Account Holder, record that information as you may have to report the Financial Account to us at the end of the reporting period.
Note:
1. When an account is held jointly, each joint holder is treated as an Account Holder.
2. You do not need to start determining your Account Holders until 1 July 2017, as the first reporting period is 1 July 2017 to 31 December 2017. In some situations you will not be able to determine your Account Holders until the end of the period.
Use this worksheet to help you determine if an individual or entity has a debt or equity interest in your NFP.
Step 1 – Debt interests
Does your NFP have any loans or any other borrowing arrangements?
Note: The entities and individuals you have loan and borrowing arrangements with have debt interests and are Account Holders for the purposes of the CRS.
Yes
|
Record these Account Holders for your future reference and continue on to determine if you have any other Account Holders.
Go to Step 2.
|
No
|
You do not currently have any Account Holders with debt interests.
Go to Step 2.
|
Step 2 – Equity interests
Is your NFP a corporation (company or an incorporated organisation)?
Yes
|
Go to Step 3
|
No
|
Go to Step 4
|
Step 3 – Shareholders
Does your NFP have any shareholders?
Note: Shareholders have equity interests and are Account Holders for the purposes of the CRS.
Yes
|
Record these Account Holders for future reference and continue on to determine if you have any other Account Holders.
Go to Step 5
|
No
|
Go to Step 5
|
Step 4 – Trust or other similar legal arrangement
Is your NFP a trust or other similar legal arrangement that holds property on trust?
Note: Other similar legal arrangements include unincorporated associations.
Property includes money and shares.
Step 5 – Holding property on trust
Does your NFP hold property in trust separately from its corporate assets?
Note: This includes money and shares.
Step 6 – Settlors
Does the trust have any settlors?
Note: Settlors have equity interests and are Account Holders for the purposes of the CRS.
Yes
|
Record these Account Holders and continue on to determine if you have any other Account Holders.
Go to Step 7
|
No
|
Go to Step 7
|
Step 7 – Beneficiaries
Does the trust have any beneficiaries?
Note: Beneficiaries include grant recipients, discretionary beneficiaries that received grants or distributions in the reporting year, and fixed beneficiaries. Exclude payments made for goods and services.
Normally, the individual or entity (Entity A) that you pass the grant to will be the Account Holder.
However, if you pay a grant to Entity A and they hold it for the benefit of another individual or entity (Entity B) and Entity A does not have the discretion on how and when it is spent, the Account Holder is Entity B.
If you do not know how the grant will be spent or who it will go to, then you may treat Entity A as the Account Holder.
Beneficiaries have equity interests and are Account Holders for the purposes of the CRS.
Yes
|
Record these Account Holders for your future reference and continue on to determine if you have any other Account Holders.
Go to Step 8
|
No
|
Go to Step 8
|
Step 8 – Ultimate effective control
Are there any natural persons that exercise ultimate effective control over the trust?
Note: This includes trustees, and in the case of a corporate trustee any director with control of the corporate trustee, and any controlling beneficiaries.
Natural persons that exercise effective control over the trust have equity interests and are Account Holders for the purposes of the CRS.
Reporting
Generally, the information required to be reported for each Reportable Account will be:
- name
- address
- jurisdiction(s) of residence
- Taxpayer Identification Number (issued by the jurisdictions of residence)
- date of birth (for individuals)
- in the case of an Account Holder that is a Passive NFE, all of the above details for any person who is a Controlling Person of the Passive NFE
- account balance or value as of the end of the calendar year (for example, value of the grant paid)
- account number (or functional equivalent)
- name and identifying number of the Reporting Financial Institution.
Further information on the reporting obligations under the CRS will be provided prior to the end of the reporting period.
See also:
Terms we use
Account Holder
An Account Holder is the person listed or identified as the holder of a Financial Account. Where a Financial Account is held jointly, each joint holder is treated as an Account Holder.
If a trust or an estate is listed as the owner of a Financial Account, it is the trust or estate that is the Account Holder and not the beneficiaries of the trust or estate.
If an entity, that is not a Financial Institution, holds a Financial Account for the benefit of another entity, as agent, custodian, nominee or signatory, the Account Holder is the entity for which the Financial Account is held.
Beneficiaries
Generally beneficiaries are individuals and entities that have a right to receive a distribution from a fixed trust or the right to be considered for a distribution from a discretionary trust. Under the CRS, an individual or entity may only be considered to be a beneficiary of a discretionary trust in the year(s) that they receive a distribution. In relation to charitable trusts, the beneficiaries will generally be individuals and entities that receive grants (or other distributions).
Controlling Person
A Controlling Person is a natural person that exercises control over an entity. Some persons connected to an entity are deemed to be Controlling Persons even if they do not have actual control.
For instance in the case of a trust, a Controlling Person will be the settlor, the trustees, the protector (if any), the beneficiaries and any other natural person that exercises ultimate effective control. In the case of another entity it could be any person in an equivalent position, for instance a director who exercises ultimate effective control.
Due diligence
Due diligence is the procedure a Financial Institution has to go through to determine if its Financial Accounts are Reportable Accounts. The due diligence procedure will require a Financial Institution to review all existing accounts (and where necessary obtain a self-certification), and obtain a self-certification for each new account, to determine if a Financial Account is reportable.
Financial Account
A Financial Account is an account maintained by a Financial Institution. For a Financial Institution that is an Investment Entity, a Financial Account is any equity or debt interests in the Financial Institution.
Financial Account also includes a depository account, a custodial account, a cash value insurance contract, and an annuity contract.
It does not include an excluded account.
Financial Assets
For the purposes of the CRS, Financial Assets include:
- securities, which includes
- a share of stock in a corporation
- partnership of beneficial ownership interest in a widely held or publicly traded partnership or trust
- note, bond, debenture, or similar
- partnership interests
- commodities
- swaps
- insurance contract or annuity contract
- interests (including futures contracts and options) in any of the above.
Financial Institution
A Financial Institution means:
- a Custodial Institution; an entity that holds, as a substantial part of its business, financial assets for the account of others
- a Depository Institution; an entity that accepts deposits in the ordinary course of a banking or similar business
- an Investment Entity; an entity that receives 50% or more of its gross income from the following activities and they either undertake these activities as a business or engage another professional entity to manage these activities for them
- trading in money market instruments
- foreign exchange, exchange, interest rate and index instruments
- transferrable securities
- commodities futures trading
- individual and collective portfolio management
- otherwise investing, administering or managing financial As assets or money
- a Specified Insurance Company; an entity that is an insurance company that issues, or makes payments with respect to, a cash value insurance contract or an annuity contract.
Passive income
Income in respect of which the recipient does not participate in a business activity giving rise to the income. It includes, but is not limited to, dividends, interest, annuities, rental income and royalties.
Passive non-financial entity (NFE)
A Passive NFE is either:
- an entity that is not an Active NFE
- a professionally managed investment entity.
An entity is an Active NFE if less than 50% of its income is passive income and less than 50% of its assets are held for the production of passive income.
Reportable Account
A Reportable Account refers to a Financial Account that is held by a Reportable Person or a Passive NFE with a Controlling Person who is a Reportable Person, which has been identified through the due diligence procedures.
Reportable Person
A Reportable Person is an individual or entity that is a tax resident in a foreign country, or an estate of a decedent that was a resident of a foreign country. A Reportable Person does not include:
- a corporation the stock of which is regularly traded on one or more established security markets
- a related entity of a corporation described in the above point
- a government entity
- an international organisation
- a central bank
- a Financial Institution.
Self-certification
Self-certification involves a Financial Institution requesting information from an Account Holder (or in certain circumstances, the Controlling Person of a Passive NFE) for any of the following purposes:
- to determine if the Account Holder is a Reportable Person
- to determine if the entity is a Passive NFE
- to determine if the Controlling Person(s) of a Passive NFE is a Reportable Person
- to collect information for reporting purposes where required.
An aspect of Self-certification requires an Account Holder to answer questions about its residency status.
Settlors
A settlor of a trust will have an equity interest in the trust. Further, a donor to the trust may also be considered a settlor. This will only occur when the donor gives a conditional donation, for example, they specify what the donation must be used for.
Under the Common Reporting Standard, NFP financial institutions must report information on foreign tax residents.