Welcome and opening
ATO Co-chair, Louise Clarke, welcomed Anthony Ward, Secretary and Company Director of Dreaming Foundation and member of the Indigenous community.
An apology was noted from Joey Borensztajn AM, Partner, Arnold Bloch Leibler.
Administration
Assistant Commission Jennifer Moltisanti will be meeting with Assistant Commissioner Martin Jacobs and Simon Sawday to discuss director ID from a Not-for-profit (NFP) sector perspective, and we will issue further guidance regarding directors appointed off the floor.
Operation Protego is investigating GST fraud which involves offenders inventing fake business and Australian Business Number (ABN) applications to gain a GST refund. The ATO would appreciate key messages at attachment C of the Agenda to be shared with members and colleagues.
The NFP Stewardship Group Charter has been refreshed. There are no significant content changes. Comments are welcome.
Treasury
Treasury has provided briefs to the new minister for charities, the Hon Dr Andrew Leigh, on tax and super issues impacting the sector.
One of the Minister’s priorities is to appoint a new Australian Charities and Not-for-profits Commission (ACNC) Commissioner.
A process to deliver on election commitments is underway.
The Remake of ACNC RegulationsExternal Link is open for consultation until 15 August 2022. The process proposes to remake the regulations, with no policy changes. Members are asked to contact Treasury if they have any concerns that the remake may result in policy change.
Treasury welcomes recommendations from members on other matters not yet before the Minister. This includes recommendations regarding ancillary fund guidelines.
The Sector Blueprint Development Timeline is expected to be presented to Cabinet in October 2022. A roadmap has been developed and will be shared after endorsement by Cabinet.
A review to double philanthropy by 2030 is progressing, and it is anticipated this will be submitted to Cabinet. Four Government commitments have been made and Treasury has reached out to the Department of Social Services colleagues, to reduce the occurrence of multiple consultation processes running simultaneously.
At this stage it is not known if a pre-budget submission process will occur.
ACNC
The ACNC Regulators Day will be held on 28 July 2022. In person seats are still available and the online registration is still open.
The Charity Law Association of Australia and New Zealand conference is to be held on 29 July 2022.
The 2022 Annual Information Statement is about to be released. The ACNC welcomes feedback on the form. There are several changes which will be updated in the Guide, which include:
- an increase to charity reporting thresholds – small charities with annual revenue under $500,000, medium charities with annual revenue between $500,000 and under $3 million, and large charities with annual revenue of $3 million or more
- new question for small charities that use cash accounting with a free text field to provide information
- large charities required to report key management personnel remuneration, where they have more than one remunerated key management personnel
- inclusion of a question for charities fundraising in the state of New South Wales, which aims to streamline reporting for charities.
Consultation on the Commissioner’s Interpretation Statements on Public Benevolent Institutions and Health Promotion Charities closes at the end of August 2022. The finalisation date will be determined and communicated after review of the submissions.
NFP Centre
The NFP Centre overview and key messages slide pack attached to the agenda is designed for members to share with their networks and members.
Taxation Ruling TR 2021/6 Income Tax – the games and sports exemption is expected to be published shortly. The content is largely in accordance with the draft. Members can expect a final copy will be shared, before sector communications start to issue in the next 4 to 5 weeks across a range of channels.
After a comprehensive design process, a solution has been developed to replace the Residential Colleges Tool. It includes the use of the ATO Charity benchmarks and the development of a Practical Compliance Guideline (PCG). The draft PCG will be released for consultation shortly and shared with the group for comment.
Goods and Services Tax Ruling GSTR 2012/2 Goods and services tax: financial assistance payments, commonly referred to as the GST and grants ruling, is being refreshed. A change to the ATO view is not expected; rather the refresh focusses on providing more contemporary examples. Members can expect that progress will start to ramp-up, as it has been prioritised as an area of focus over the coming period.
A Decision Impact Statement is being developed following the decision on a school building fund operated by a Buddhist society. We expect to review case assessments made prior to this decision, once steps preceding such decisions are worked through.
The roll-out of the Modernisation of the Business Registers continues to progress:
- Companies Release
- The intent of the Companies Release is to provide over 3 million current companies a more streamlined way to register, view and maintain their details. This will provide most entities a central point to maintain their company registry obligations.
- The Companies Release does not impact reporting obligations with the ACNC.
- The project team is keen for members to participate in an out-of-session discussion to explore the proposed Australian Business Registry Services (ABRS) agent model for the Companies Release. If there is interest, we can arrange an online session as part of the September meeting.
- The ACNC has dedicated an officer to work on the implementation of this measure and has been working very closely with the ATO’s project team.
- Director ID
- Director ID updates will issue via the NFP Newsletter, to raise awareness and encourage directors to apply now for a director ID.
- The director ID is a unique identification number that a director will apply for once and keep forever. Members can refer to Page 16 on the NFP Centre key messages presentation for an outline of who needs to apply and when.
- The ABRS website provides more information to explain the application process for directors appointed without notice. A new scenario specific to NFPs (scenario 5) has been added at Director ID scenarios | Australian Business Registry ServicesExternal Link.
- The ABRS team is currently working through concerns raised at our March meeting regarding director appointments from the floor of an AGM. The discussion between Assistant Commissioners Martin Jacobs and Jennifer Moltisanti about further guidance will feed into this work.
- The ATO is proposing to remove the ‘incidentals’ column from the short-term charity benchmark market tables. We invite feedback from members about any likely impacts should incidentals be removed. More information will be emailed to interested members.
- Deductible Gift Recipient (DGR) Reforms that require an organisation to register as a charity if they are not an Australian Government Agency, are in the transitional phase. There are several key messages to share:
- DGRs endorsed by the ATO before 14 December 2021 have up to December 2022 to meet the new requirements as part of the legislated 12 month transitional arrangements.
- We encourage all DGRs to prepare, if they have not already, and make arrangements to meet the updated eligibility requirements. Organisations can visit DGRS required to be a registered charity to check if they meet the DGR eligibility requirements and remain entitled to be DGR endorsed.
- For organisations that will not be able to meet the eligibility requirements, they will need to distribute any surplus income or assets to another eligible DGR and request cancellation of their DGR endorsement by no later than 14 December 2022.
- We are working with state associations and government departments to support sub-segments, that may not be able to achieve charity registration.
- Charity applications have been increasing, with several hundred already received by the ACNC. The deadline to register as a charity is 14 December 2022. However, a three-year extension of time is available for eligible entities. The extension of time form will be available on ato.gov.au soon.
- Thanks to members who provided feedback on the extension application. The focus has been to keep the application as simple as possible for DGRs to complete.
- For advice call our dedicated NFP Advice and Endorsement team on 1300 130 248, 8:00 am to 6:00 pm Monday to Friday.
New measure – Enhancing transparency of income tax exemption
An overview was provided of the early and developing administrative design for the Self-Assessed Income Tax Exempt Entities measure. From 1 July 2023, non-charitable NFPs with an active ABN will need to start to notify the ATO that they have self-assessed their eligibility for income tax exemption. They will do this by completing a self-review return on an annual basis, with the first lodgment due after 30 June 2024.
Discussions with this group started in 2019.
Commencing in March 2022, we started consultation with NFPs, peak bodies and intermediaries to listen, understand and validate:
- unique characteristics of non-charitable not-for-profits that self-assess income tax exemption and how they make this determination now
- the level of advice and guidance that may be needed to support NFPs
- expectations for engaging and communicating about how and when to meet the new reporting requirement.
We heard many NFPs are not aware of the existing requirement to self-assess income tax exemption. Most NFPs hold a mistaken assumption that because they are an NFP, that automatically makes them income tax exempt.
We are at the early stages of developing the high-level design. Between now and 2024, we will be taking an iterative approach and working closely with NFPs and sector advisers to develop, design and test the self-review return and system. The focus is to:
- make the return as simple, quick and automated as possible
- develop guidance to assist NFPs to understand their tax status to get it right from 1 July 2023.
We want to automate the process as much as possible, however we have limited data right now. We welcome your thoughts on other data metrics we should be considering.
This measure is designed to enhance trust and confidence in the sector and support a level playing field with similar, but not the same, regulatory requirements between reporting requirements of charities and non-charitable not-for-profits. Reliable data, acquired through regular reporting, will enable the ATO to provide an assurance that NFPs correctly access income tax concessions.
Members were invited to provide comment on the early draft high-level design to the ATO project team.
Member comments
- How is transparency and instilling confidence measured?
ATO advised that as the regulator the ATO must have confidence the system is working and we are getting it right.
There is a perception that all NFPs are getting it right and doing the right thing. We have recently worked with a group of NFPs that were self-assessing, but they are taxable. An analysis of Australian and New Zealand Standard Industrial Classification data has also indicated there are organisations with charitable purposes that are not registered as charities. We have several projects currently looking at risk profiles.
- We need further clarification on the purpose of the measure and policy goal. How will this be communicated?
Treasury noted that these changes that the ATO will administer, were derived from the ACNC Legislation Review 2018. The recommendation noted it is time to expand the regulations to the NFP sector. A decision was made by the government of the day to task this to the ATO, and not the ACNC.
It was agreed that clarification would be provided and discussed at an extra meeting to workshop the Self-Assessed Income Tax Exempt Entities be scheduled for September. A placeholder will be issued shortly.
- Self-assessing NFPs need to be looked at via the tax governance lens; there is a large amount of research the ATO has for tax paying organisations. Would looking at private group governance and public group governance help?
The ATO has a separate project that is focussing on governance, and we will look into expanding on this.
Other business
Ben Scuteri, Worlds Vision Australia, noted the recent issues associated with the war in Ukraine and is seeking clearer guidance around the differences between Public Benevolent Institution (PBI), Overseas Aid Funds and Developing Country Funds. Assistant Commissioner Jennifer Moltisanti noted the ATO will look to develop a fact sheet with a view to scope an update to the Public Advice and Guidance.
Attendees
Organisation |
Member |
|---|---|
ATO |
Louise Clarke (Co-chair), Private Wealth |
ATO |
Jennifer Moltisanti, Private Wealth |
Australian Charities and Not-for-profits Commission |
Anna Longley |
Australian Council for International Development |
Jocelyn Condon |
Australian Federation of Disability Organisations |
Ross Joyce |
Australian Institute of Company Directors |
Phil Butler |
Centre for Social Impact, Swinburne University of Technology |
Krystian Seibert (Co-chair) |
Charities and Not-for-profits Committee, Law Council of Australia |
Seak-King Huang |
Chartered Accountants Australia and New Zealand |
Susan Franks |
Clubs Australia |
Simon Sawday |
Community Council for Australia |
David Crosbie |
Giuntabell |
Nunzio Giunta |
HWL Ebsworth |
Timothy Stokes |
Joe Zabar Consulting |
Joe Zabar |
Justice Connect |
Sue Woodward |
Philanthropy Australia |
Sam Rosevear |
Prolegis Lawyers |
Jae Yang |
The Dreaming Foundation |
Anthony Ward |
The Salvation Army Australia |
John McIntosh |
The Tax Institute |
Bridgid Cowling |
Treasury |
Jacky Rowbotham |
Worlds Vision Australia |
Ben Scuteri |
Guest attendees
Organisation |
Attendee |
|---|---|
ATO |
Elizabeth Hynes, Private Wealth |
ATO |
Frances Gobel, Private Wealth |
ATO |
George Grespos, Private Wealth |
ATO |
Ivica Bolonja, Office of the Chief Tax Counsel |
ATO |
John Churchill, Office of the Chief Tax Counsel |
ATO |
Joy Tillman, Private Wealth |
ATO |
Marisa Hewitt, Private Wealth |
ATO |
Matthew Musialik, Private Wealth |
ATO |
Sheridan Harvey, Policy, Analysis and Legislation |
Apologies
Organisation |
Member |
|---|---|
Arnold Bloch Leibler |
Joey Borensztajn |