Welcome to 2023!
It's been 20 years since I joined the ATO.
I can still remember my initial interview. I was so nervous that I didn’t sleep for days. I had recently returned to work from maternity leave and was unsure how I’d manage a new organisation and being a mum.
I recall the interview panel clearly; three formidable Assistant Commissioners who were looking for change. And so I began in my role in large market compliance.
In my first week, the cultural change was overwhelming and I felt I’d made the biggest mistake of my life. However, I’m not a quitter and am incredibly resilient. I quickly developed my networks and got down to business. And what a business it is.
I’ve worked in all the market segments, small, medium and large; lived in Paris as Australia’s first Minister Counsellor Taxation and led incredibly demanding and exciting projects.
When I reflect on what I love the most about tax, and yes, I do love tax, it’s the people – my colleagues and our clients. I’m unashamedly passionate about Australia’s ongoing prosperity. For this reason, I’ve focused my career on making a difference delivering for Australians.
This passion is shared by not-for-profits.
From encouraging sport and the arts, to supporting the most vulnerable in our community, not-for-profits vary in purpose as well as size and structure. However, their passion is the same – to make a difference and deliver for Australians.
There are just under 207,000 not-for-profits registered in the Australian tax system. The vast majority, about 70%, self-assess income tax exemption, about one third are endorsed tax concession charities and about 3% are taxable not-for-profits.
The ATO has remit of all not-for-profits and is responsible for the administration of Commonwealth tax concessions, such as income tax exemption and deductible gift recipient (DGR) status. Organisations with a charitable purpose must be registered with the Australian Charities and Not-for-profits Commission (ACNC) and endorsed by the ATO in order to access Commonwealth tax concessions.
At a recent not-for-profit seminar, I outlined what attracts our attention and how not-for-profits can mitigate risks and issues. I also confirmed the ATO’s role, which includes:
- providing timely and tailored advice
- assuring not-for-profits are operating for purpose and accessing concessions appropriately
- supporting not-for-profits in times of need during disaster periods, and
- influencing the shape of the tax and Super systems.
The government is very supportive of not-for-profits and generous policy settings reflect the value they place on the important services not-for-profits provide. For this reason, it is critically important we remain vigilant to those who seek to undermine or take advantage of the available supports.
The ATO uses intelligence from many sources including media reports, information from the public and referrals from other government agencies to assess issues and risks.
Where we form a view that individuals or entities are not acting in accordance with their obligations, we will take appropriate action. That may include a review or audit. We will also revoke entitlement to tax concessions when we come to the view that an organisation does not meet the eligibility requirements set out in law.
‘Private’ not-for-profit foundations
Recently we’ve seen some behaviours that aren’t consistent with our expectations.
We’ve received intelligence about the promotion of ‘private’ not-for-profit foundations created to avoid or evade tax. We also saw this kind of activity a few years ago in 2015-16.
In a typical arrangement of this type, an advisor or promoter assists participants to set up a 'private' 'foundation', which is then claimed to be exempt from all taxes.
The promoter tells participants that, by operating their business or income producing activities through such a foundation, they are able to 'opt out’ of the tax system.
Unlike genuine NFP foundations, participants stream their untaxed employment, contractor, or business income through the sham foundation, where they pay no tax on the income and use the funds for their own benefit.
We’re taking this matter seriously and have already commenced investigations of potential promoters.
You can help by notifying us of anyone you believe is promoting or participating in this type of arrangement via the ATO Tipoff Form. If you’ve participated in one of these arrangements, I urge you to come forward now via our dedicated not-for-profit phone service 1300 130 248.
For more information you can refer to taxpayer alert TA 2016/5.
PBIs and FBT
Another issue that’s come to our attention involves Not-for-profit organisations that are operating registered public benevolent institutions (PBIs) and are endorsed by the Commissioner of Taxation as eligible for an exemption from fringe benefits tax (FBT).
Benefits provided to employees of the PBI are exempt from FBT (up to a capping threshold). We are concerned with arrangements where employees of PBIs are used to undertake charitable or commercial activities of other entities that are not benevolent in nature.
These arrangements involve the provision of employment services by the PBI to another entity within the group and typically include a charge-back or labour-hire agreement.
The arrangement is purportedly claimed with the purpose of providing funding to the PBI to achieve its benevolent purpose.
While the Commissioner will continue to apply the law in accordance with Decision impact statement: Commissioner of Taxation v The Hunger Project Australia (NSD 1604 of 2013), we will review arrangements that have the sole and dominant purpose of avoiding or reducing FBT.
Use the ATO Tipoff Form if you’re aware of such arrangements or contact us on 1800 060 062.
I mentioned late last year that 2023 is shaping up to be a monumental year. We want to make sure we start it off in the best possible way and address any risks or players that strive to attack the integrity of the sector.
Let’s work together as we continue to support and grow a vibrant sector that is valued by everyone.
Take care and stay safe.
JenniferThis month, Assistant Commissioner Jennifer Moltisanti reflects on administration, fringe benefits tax and more.