House of Representatives

Taxation Laws Amendment Bill (No. 5) 1992

Taxation Laws Amendment Act (No. 5) 1992

Income Tax (Dividends and Interest Withholding Tax) Bill 1992

Income Tax (Dividends and Interest Withholding Tax) Amendment Act 1992

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon John Dawkins, M.P.)

Australia-United States Coral Sea Commemorative Council Incorporated

Summary of proposed amendments

Purpose of amendment: To allow, for a limited period, income tax deductions for gifts made to the Australia-United States Coral Sea Commemorative Council Incorporated.

It is proposed that the amendments be backdated to apply to gifts made on or after 26 November 1991 and on or before 30 June 1992.

Date of effect: 26 November 1991.

Background to the legislation

On the 18 June 1992 the Treasurer announced that gifts made to the Australia-United States Coral Sea Commemorative Council Incorporated would be tax deductible under the gift provisions of the income tax laws.

Tax deductibility status is to apply to gifts made on or after 26 November 1991 and on or before 30 June 1992. Such status is to assist the Council in satisfying its objective:-


"To promote and foster commemoration of the Australian-United States friendship and co-operation, particularly in relation to the Battle of the Coral Sea."

Explanation of proposed amendments

The Bill proposes to amend paragraph 78(1)(a) of the Act to insert new subparagraph 78(1)(a)(cviii). This subparagraph will authorise deductions for gifts made to the Australia-United States Coral Sea Commemorative Council Incorporated [Clause 7, new subparagraph 78(1)(a)(cviii)] .

The Bill also proposes to insert subsection 78(6AL) into the Act to limit the time period for which tax deductibility status is given to gifts that are made under subparagraph 78(1)(a)(cviii) of the Act. It is proposed to limit deductibility to those gifts that are made on or after 26 November 1991 and on or before 30 June 1992 [Clause 7, new subsection 78(6AL)] .

These amendments will authorise deductions for gifts made on or after 26 November 1991 and on or before 30 June 1992, to the Australia-United States Coral Sea Commemorative Council Incorporated.

Gifts to Gift Funds of Environmental Organisations

Summary of proposed amendments

Purpose of amendment: To give effect to a 1992 Budget announcement to allow deductions for gifts made directly to a gift fund of an environmental organisation admitted to the Register of Environmental Organisations. Treasurer's Press Release No. 125 of 1992 outlined the arrangements for the implementation of the announcement.

The amendment will allow gift funds of environmental organisations to be eligible to receive tax deductible donations where they have obtained entry on the Register. To be listed on the Register, a fund must be approved by the Treasurer and the Minister responsible for the Environment (the Environment Minister).

The amendment will take effect from the date the Bill receives Royal Assent. This is the date from which organisations become eligible to be included on the Register and therefore receive tax deductible donations.

A deduction will continue to be allowed for donations made to the five environmental organisations that are presently listed in the gift provisions provided two new requirements are met. These organisations also have the option of seeking admission to the Register of Environmental Organisations if they meet the requirements for entry.

Date of Effect: The amendments to include the Register of Environmental Organisations in the income tax gift provisions apply to gifts made from the date the Bill receives Royal Assent.

The amendments to require the five organisations presently listed in paragraph 78(1)(a) to satisfy two new requirements if they are to continue to have tax deductible gift status apply from the year commencing 1 July 1993.

Background to the legislation

There are five environmental organisations listed in the existing gift provisions (paragraph 78(1)(a)) that are allowed to receive tax deductible donations. These organisations are:

·
the Australian Conservation Foundation Incorporated
·
the World Wide Fund for Nature Australia
·
various National Park Associations and Conservation Bodies (see below)
·
Greening Australia Limited
·
Landcare Australia Limited

The National Park Associations and Conservation Bodies referred to above, and as listed in subparagraph 78(1)(a)(lxxiii), are the National Parks Association of New South Wales, the Victorian National Parks Association, the Victoria Conservation Trust, the National Parks Association of Queensland, The Nature Conservation Society of South Australia Incorporated, the National Parks Foundation of South Australia Incorporated, the Western Australian National Parks and Reserves Association Incorporated, the Tasmanian Conservation Trust Incorporated and the National Parks Association of the Australian Capital Territory Incorporated.

Other environmental organisations have had access to tax deductible donations indirectly through some of the above bodies, in particular, the Australian Conservation Foundation Incorporated and the Tasmanian Conservation Trust Incorporated. The Foundation itself is a listed organisation under subparagraph 78(1)(a)(xliv).

Under the proposal a gift fund administered by an environmental organisation that has been approved by the Treasurer and the Environment Minister will be listed on a register known as the Register of Environmental Organisations. Donations of $2 or more of money or of certain property to a fund listed on the Register will be tax deductible [Subclause 7(b), new subparagraph 78(1)(a)(cviv)] . To be included on the Register, an organisation and its fund need to satisfy certain eligibility criteria [Clause 9, new section 78AB] .

The five environmental organisations which are presently listed in paragraph 78(1)(a) will be required to satisfy two new requirements as from the year commencing 1 July 1993 [Clause 7(c), new subsection 78(6)] .

The Register is to be administered by the Department of the Arts, Sport, the Environment, and Territories (DASET) [Clause 9, new subsection 78AB(5)] .

Explanation of proposed amendments

What is the effect of the amendments?

i.
Organisations which have separate listing in 78(1)(a)
Paragraph 78(1)(a) of the income tax law operates to allow tax deductible gifts to, among others, five environmental organisations that are presently listed in the gift provisions. Under the proposal, these organisations may seek to be admitted to the Register of Environmental Organisations. If they do not seek admission to the Register and continue to rely on their separate listing for tax deductibility gift status they will be required to satisfy two new requirements as from the year commencing 1 July 1993.
The first requirement is that the organisations must agree to give to the Department of the Arts, Sport, the Environment and Territories, within a reasonable period after the end of the financial year, statistical data about gifts made to the institution during the financial year. The Environment Minister would regard a period of four months after the end of a financial year as a reasonable period.
The second requirement is that these organisations must have a policy of not acting as a mere conduit, or umbrella organisation, for other environmental bodies. In other words, an organisation's policy must state that any allocation of funds or property to other institutions, bodies or persons will be made in accordance with the established objectives of the organisation and not be influenced by the expressed preference or interest of a particular donor to the organisation. Organisations can not act as a mere collection agency for moneys intended by a donor to be transferred onto other preferred institutions, bodies or persons. [Clause 7(c), new subsection 78(6)] .
ii.
Organisations admitted to the Register
Donations to gift funds administered by environmental organisations which are listed on the Register of Environmental Organisations will be tax deductible [Subclause 7(b), new subparagraph 78(1(a)(cviv)] . Donors will be able to make donations to gift funds directly and it will no longer be necessary for such funds to seek assistance through the organisations currently listed in paragraph 78(1)(a). In fact, this type of assistance will be difficult to obtain given one of the new requirements for those organisations which are currently separately listed (see point i. above).

What is an 'environmental organisation'?

The eligibility criteria for registration of a body as an environmental organisation include the following:

(a)
its principal purpose, or each of its principal purposes, must be an environmental purpose [Clause 9 , new paragraph 78AB(2)(a)]. 'Environmental purpose' is defined in new subsection 78AB(1).
(b)
it must be non-profit distributing and must not give any of its property or financial surplus to its members, shareholders, beneficiaries, controllers or owners [Clause 9, new paragraph 78AB(2)(b)].
(c)
it must maintain a 'gift fund' which is a public fund to which gifts of property or money for its environmental purpose or purposes are to be made [Clause 9, paragraph 78AB(2)(c)].
(d)
in the event of winding up, any surplus assets or funds are to be transferred to another fund that is listed on the Register of Environmental Organisations [Clause 9, paragraph 78AB(2)(d)].
(e)
it must agree to give to the Environment Department, within a reasonable period after the end of each year, statistical data about gifts to its gift fund during the financial year [Clause 9, new subparagraph 78AB(2)(e)]. The Environment Minister would regard a period of four months after the end of a financial year as a reasonable period.
(f)
it must agree to comply with any rules made from time to time by the Environment Minister and Treasurer to ensure that gifts to its gift fund are used only to support its environmental purpose or purposes [Clause 9, new paragraph 78AB(2)(f)].
(g)
it must have a policy of not acting as a mere conduit, or umbrella organisation, for other organisations, bodies or persons [Clause 9, new subparagraph 78AB(2)(g)].
In other words, an organisation's policy must state that any allocation of funds or property to other organisations, bodies or persons will be made in accordance with the established objectives of the organisation and not be influenced by the expressed preference or interest of a particular donor to the organisation. Organisations can not act as a mere collection agency for moneys intended by a donor to be transferred onto other preferred organisations, bodies or persons.
(h)
if the body is a body corporate (other than a statutory authority) or a co-operative society the membership must consist wholly or principally of bodies corporate; or there must be at least 50 members of the body who are natural persons and who are also regarded as financial members and entitled to vote at general meetings [Clause 9, new paragraph 78AB(2)(h)].

New subparagraph 78AB(2)(h)(iii) provides that the Environment Minister may determine that because of special circumstances, a body does not have to meet either of these two criteria. This may happen, for example, where a body is constituted in such a way as to render membership of more than 50 individuals inappropriate or impractical.

What is meant by an "environmental purpose"?

One of the conditions for registration as an environmental organisation is that its principal purpose (or each of its principal purposes) must be an "environmental purpose". Environmental purpose means:

·
the protection or enhancement of the environment or a significant aspect of the environment; or
·
a purpose relating to providing information, education or carrying on research about the environment or a significant aspect of the environment.

Environment in this context is the natural environment and includes all aspects of the natural surroundings of humans. The term natural to describe the environment is used here to make a distinction between this type of the environment other types of the environment, such as the 'built' , 'cultural' and 'historic' environments.

The 'natural environment' would exclude, for example, constructions such as the retaining walls of dams; cultivated parks and gardens; zoos and wildlife parks, except those principally carried on for the purpose of species preservation; and heritage properties.

The 'natural environment' and concern for it would include, for example, significant natural areas such as rainforests; wildlife and their habitats; issues affecting the environment such as air and water quality, waste minimisation, soil conservation, and biodiversity; and promotion of ecologically sustainable development principles.

What is a gift fund?

A gift fund is a public fund to which donations of money or property are made. Money from interest on donations, income derived from donated property, and money from the realisation of such property are to be deposited into the fund. The fund needs to be kept separate from other funds. [Clause 9, paragraph (c) of subsection 78AB(2) which lists the eligibility criteria for registration as an 'environmental organisation'] .

How does a gift fund become eligible to receive tax deductible donations?

To satisfy the eligibility criteria a gift fund needs to:

(a)
be established and maintained for environmental purposes. 'Environmental purpose' is defined in new subsection 78AB(7);
(b)
be administered by a body that has been certified by the Environment Minister to be an environmental organisation [Clause 9, new subsection 78AB(1)] ;
This certification has to be in writing but it is sufficient that it is by way of letter signed by the Environment Minister stating that a body is eligible for admission to the Register.
(c)
be included by DASET on the Register of Environmental Organisations at the direction of the Treasurer and the Environment Minister [Clause 9, new subsection 78AB(3)] . Gifts to the fund will be deductible from the date specified in the direction. A fund cannot be included on the Register retrospectively.

In exercising their discretion whether to give a direction to DASET, the Treasurer and the Environment Minister need to take into account the policies and budgetary priorities of the Australian Government [Clause 9, new subsection 78AB(4)] .

The term 'may' in relation to a Minister's discretion in section 78AB means in 'his or her discretion' as provided for in subsection 33(2A) of the Acts Interpretation Act .

Can an environmental organisation and it's gift fund be removed from the Register?

An environmental organisation and its gift fund may be removed from the Register on the direction of the Treasurer and the Environment Minister [Clause 9, new subsection 78AB(6)] . Whether an organisation and its gift fund is removed is at the discretion of the above Ministers. Gifts made to that fund would cease to be deductible from the date specified in the direction. A fund cannot be removed retrospectively.

Miscellaneous amendments to gift provisions

Subparagraph 78(1)(a)(cvii) amended so "register" is omitted and substituted by "Register of Cultural Organisations" [Subclause 7(a)].

Section 78AA amended by omitting "Tourism" from the definitions of "Arts Department" and "Arts Minister" [Clause 8].

Contributions to registered political parties

A minor technical amendment will relocate and renumber subsection 51(7A) of the Act to subsection 78(1B). The cross reference in subsection 51(7A) to paragraph 78(1)(aaa) now becomes a cross reference to paragraph 1(aaa).


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