Summary – The Federal budget which was delivered on 14 May 2013 contained the following announcements that relate particularly to charities and not-for-profit organisations:

 

1. Not-for-profit sector reforms — introducing a statutory definition of ‘charity’

Statutory definition of charity
Revenue ($m)	2012/2013	2013/2014	2014/2015	2015/2016	2016/2017
Australian Taxation Office	–	*	*	*	*

 

The Federal budget included an amended start date for the proposed definition of charity which was due to commence on 1 July 2013.

This has now been deferred until 1 January 2014. The long awaited exposure draft legislation was released in April and submissions for consultation closed on 3 May 2013. For more information regarding the proposed definition please take a look at our previous blog. Despite the later start date the Federal Government still proposes to introduce and pass the legislation in the final sitting session before the election, although we question whether this will occur with the limited number of sitting days available. The measure is estimated to have a small but unquantifiable cost to revenue over the estimates period.

2. Better targeting of tax concessions — also known as the “UBIT” – later start date and conclusion of transitional arrangements

Better targeting of tax concessions
Revenue ($m)	2012/2013	2013/2014	2014/2015	2015/2016	2016/2017
Australian Taxation Office	-8.0	-29.0	-8.0	74.0	75.0
Related expense ($m)
Department of the Treasury	-1.0	-1.0	9.0	29.0	30.0

 

Forward estimates for the proposed Unrelated Business Income Tax, commonly known as UBIT have been provided in the Federal budget. The tax, which has a delayed start date of 1 July 2014 will become payable on “new” unrelated commercial activities. A “new” unrelated commercial activity is one that commenced after 7.30pm (AEST) on 10 May 2011. UBIT would be payable only on any surplus that is not applied to the altruistic purposes of the entity. If a NFP is liable to pay UBIT, the tax will be calculated commencing on the revised commencement date of 1 July 2014. For more information on the UBIT, please take a look at our earlier blog.

The costings provided by the Federal Government are estimated to result in a gain to revenue of $104.0 million (see table above), and an increase in GST payments to the States and Territories of $66.0 million, over the forward estimates period (2012/13 to 2016/17). These projections for income are provided despite the statement earlier by the Government that the UBIT would not be a “revenue-raising measure” and “you won’t see a single dollar gained in the forward estimates as a result of this reform”.

 

3. Proposed DGR category for providers of ethics classes in government schools

 

Extending DGR to organisations which provide ethics classes in government schools
Revenue ($m)	2012/2013	2013/2014	2014/2015	2015/2016	2016/2017
Australian Taxation Office	*	-0.2	-0.3	-0.3	-0.3

 

On 8 April 2013, the Assistant Treasurer announced that providers of ethics classes in government schools would be eligible for deductible gift recipient (DGR) status. This measure will allow public funds that are established and maintained solely for the purpose of providing ethics classes in government schools to be endorsed as DGRs as a new general category. The budget provided estimated costings for this proposal and will have a cost to revenue of $1.1m over the forward estimates period. The proposed amendment is due to be introduced and considered in the remaining sitting days of parliament before the election.

It is clear that the Government has a lot of work to do in getting the above legislation passed and we will keep you informed of any progress as it occurs.

If you would like any additional information please contact Bill d’Apice (Partner), Chris Curran (Senior Associate) or Anna Lewis (Lawyer).