House of Representatives

Taxation Laws Amendment Bill (No. 6) 2003

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 7 Register of harm prevention charities

Outline of chapter

7.1 Schedule 12 to this bill amends the ITAA 1997 to establish a new category of DGR, namely, a register of harm prevention charities. Harm prevention charities are charitable institutions whose principal activity is to promote the prevention or the control of behaviour that is harmful or abusive to human beings.

Context of amendments

7.2 The income tax law allows taxpayers to claim income tax deductions for certain gifts to DGRs. To be a DGR, an organisation must fall within a category of organisations set out in Division 30 of the ITAA 1997 (or be listed specifically under that Division).

7.3 The categories include organisations on the register of environmental organisations and organisations on the register of cultural organisations.

7.4 The new register is part of the Government's response to the Report of the Inquiry into the Definition of Charities and Related Organisations. The Treasurer announced the response on 29 August 2002 (Treasurer's Press Release No. 49).

7.5 The register consists of charitable institutions whose principal activity is to promote the prevention or the control of behaviour that is harmful or abusive to human beings. The amendment will assist these institutions to attract public support for their activities.

Summary of new law

7.6 A register of harm prevention charities will be established for charitable institutions whose principal activity is to promote the prevention or the control of behaviour that is harmful or abusive to human beings.

7.7 Harm prevention charities will be entered on the register by direction of the Treasurer and the Minister for Family and Community Services. The register will be kept by the Secretary of the Department of Family and Community Services.

7.8 Institutions on the register will be entitled to apply for endorsement as DGRs.

7.9 The amendments apply to gifts made on or after 1 July 2003.

Detailed explanation of new law

7.10 Section 30-15 of the ITAA 1997 allows a deduction for certain types of gifts or contributions made to particular recipients.

7.11 Item 1 in the table to subsection 30-15(1) provides that certain gifts made to a fund, authority or institution covered by Subdivision 30-B of the ITAA 1997 are deductible, provided certain conditions are met. A special condition under item 1 is that the fund, authority or institution must meet the requirements of section 30-17 (unless it is mentioned by name under Subdivision 30-B). Section 30-17 includes a requirement for a fund, authority or institution to be endorsed by the Commissioner in order to obtain DGR status.

7.12 Subdivision 30-B is amended to include public funds that are on the register of harm prevention charities. These public funds are inserted in the table of general categories of welfare and rights recipients at item 4.1.4 in subsection 30-45(1). [Schedule 12, item 3, subsection 30-45(1)]

7.13 A Subdivision is inserted, as Subdivision 30-EA, to provide for the register. [Schedule 12, item 4, Subdivision 30-EA]

Register of harm prevention charities

7.14 The Secretary of the Department of Family and Community Services will be required to keep the register. [Schedule 12, item 4, section 30-287]

Entering harm prevention charities on the register

7.15 The Secretary will be required to enter on the register each harm prevention charity, and the public fund it maintains, that the Secretary has been directed to enter by the Treasurer and the Minister for Family and Community Services. [Schedule 12, item 4, subsection 30-289B(1)]

7.16 The Treasurer and the Minister may so direct the Secretary only if the Minister has notified the Treasurer in writing that the Minister is satisfied that an institution is a harm prevention charity. [Schedule 12, item 4, subsection 30-289B(2)]

7.17 The direction must be in writing and must specify the day on which the charity and public fund are to be entered on the register. The day must be the day on which the direction is given or a later day. [Schedule 12, item 4, subsection 30-289B(3)]

7.18 The Treasurer and the Minister must have regard to the policies and budgetary priorities of the Commonwealth Government in deciding whether to give a direction. [Schedule 12, item 4, subsection 30-289B(4)]

Removing harm prevention charities from the register

7.19 The Treasurer and the Minister for Family and Community Services may direct the Secretary of the Department of Family and Community Services to remove a harm prevention charity, and the public fund it maintains, from the register. [Schedule 12, item 4, subsection 30-289C(1)]

7.20 The direction must be in writing and must specify the day on which the charity and public fund are to be removed from the register. The day must be the day on which the direction is given or a later day. [Schedule 12, item 4, subsection 30-289C(2)]

Harm prevention charities

7.21 A harm prevention charity must be a charitable institution that is endorsed as exempt from tax under Subdivision 50-B. [Schedule 12, items 4 and 7, section 30-288 and definition of 'harm prevention charities' in subsection 995-1(1)]

7.22 A charitable institution is a charity that is an institution.

7.23 The criteria to decide whether or not an entity is a charity are established in common law. A charity is an entity established for charitable purposes. Charitable purposes are the relief of poverty, the relief of the needs of the aged, the relief of sickness or distress, the advancement of religion, the advancement of education and other purposes beneficial to the community.

7.24 Whether an entity has the character of an institution will depend on a range of features including its activities, size, permanence, purposes and recognition. Incorporation is not enough, on its own, to show that an entity is an institution. A charitable institution would not usually include an entity that is established, controlled and operated by family members and friends.

7.25 In order for an institution to be a harm prevention charity, the principal activity of the institution must be the promotion of the prevention or the control of behaviour that is harmful or abusive to human beings. [Schedule 12, item 4, section 30-288, subsection 30-289(1)]

7.26 'Behaviour that is harmful or abusive' means one or more of the following:

·
emotional abuse;
·
sexual abuse;
·
physical abuse;
·
suicide;
·
self-harm;
·
substance abuse;
·
harmful gambling.

[Schedule 12, item 6, definition of 'behaviour that is harmful or abusive' in subsection 995-1(1)]

7.27 A harm prevention charity must maintain a public fund. Gifts of money or property for its principal activity are to be made to the fund, and any money received because of such gifts is to be credited to the fund. The fund is not to receive any other money or property. [Schedule 12, item 4, section 30-288, subsection 30-289(2)]

7.28 It must use gifts made to the fund, and any money received because of such gifts, only for its principal activity. [Schedule 12, item 4, section 30-288, subsection 30-289(3)]

7.29 It must have agreed to comply with any rules that the Treasurer and the Minister for Family and Community Services make to ensure that gifts made to the fund are used only for its principal activity. [Schedule 12, item 4, section 30-288, subsection 30-289(4)]

7.30 A harm prevention charity must have a policy of not acting as a mere conduit for the donation of money or property to other organisations, bodies or persons. [Schedule 12, item 4, section 30-288, subsection 30-289A(1)]

7.31 It must have rules providing that, if the public fund is wound up, any surplus assets of the fund are to be transferred to another fund that is on the register. [Schedule 12, item 4, section 30-288, subsection 30-289A(2)]

7.32 A harm prevention charity must have agreed to give the Secretary of the Department of Family and Community Services, within a reasonable period after the end of each income year, statistical information about gifts made to the public fund during that income year. [Schedule 12, item 4, section 30-288, subsection 30-289A(3)]

Consequential amendments

7.33 Section 30-5 provides a guide for navigating Division 30. Subsection 30-5(5) is amended as a result of the insertion of the provision for the register of harm prevention charities in Subdivision 30-EA. [Schedule 12, items 1 and 2, subsection 30-5(5)]

7.34 Section 30-315 of the ITAA 1997 contains an index to Division 30. The table in subsection 30-315(2) is amended as a result of the inclusion of harm prevention charities in Subdivision 30-B. [Schedule 12, item 2, subsection 30-315(2)]

Application and transitional provisions

7.35 The amendments apply to gifts made on or after 1 July 2003. [Schedule 12, item 3, subsection 30-45(1)]


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