The Government has started to “clear the backlog of legislative matters and restore integrity to the Australian taxation system” by announcing the outcome of the review of 92 unlegislated tax programs.
On 6 November 2013, the Government identified 92 announced but unlegislated tax and superannuation measures and stated:
“Of the 92 unlegislated and unresolved tax and superannuation changes, the Government will proceed with 18 initiatives. A further three initiatives will be significantly amended. The Government will not proceed with seven initiatives. Assistant Treasurer Arthur Sinodinos, with assistance from the Board of Taxation will undertake consultation with tax experts, including a number drawn from the Board’s advisory panel over the next two weeks with a disposition not to proceed with the remaining 64 measures.
It will be an expedited and thorough review with industry, focusing on whether there are any unintended consequences from not proceeding with the measures or whether there are compelling reasons why the measure should proceed. We are advised that the fiscal impact of the vast bulk of the remaining 64 initiatives is expected to be minimal.”
The charity related measures requiring “further consultation” included:
- Better targeting of not-for-profit tax concessions;
- Reforming the ‘in Australia’ requirements; and
- Defining ‘not-for-profit’ in the tax laws.
1. Better Targeting of Not-For-Profit Tax Concessions (also known as UBIT)
The Unrelated Business Income Tax (UBIT) will not be proceeding.
The Treasurer’s press release stated “The Government will also not proceed with the measure to ‘better target’ not-for-profit tax concessions at this stage, but will explore simpler alternatives to address the risks to revenue.”
The purpose of the proposed legislation was to ensure that tax concessions provided to NFP entities were targeted only at those activities that directly furthered the NFP’s altruistic purposes. Any activity pursued by a NFP entity that was deemed to be “unrelated” business would not be eligible for the tax concessions that the entity is registered for (including FBT, GST and DGR).
Importantly, any surplus from “unrelated” business activities that was not applied for the altruistic purposes of the entity would have been subject to income tax. This proposed tax has commonly been referred to as “UBIT”.
For more information on UBIT see our previous blog.
2. “in Australia”
This legislation will be proceeding when parliament resumes in the New Year.
The Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill 2012 (also known as the “in Australia” legislation) attempts to ensure that:
– income tax exempt entities generally must be operated principally in Australia and for the broad benefit of the Australian community; and
– deductible gift recipients (DGRs) generally must be operated solely in Australia and for the broad benefit of the Australian community.
If your charity undertakes activities overseas we recommend that you familiarise yourself with this legislation and contact us with any queries.
For more information on the “in Australia” legislation, please see our blog on the Bill when it was at the Exposure draft stage.
3. Definition of Not-For-Profit
The “in Australia” legislation included a definition of “Not-For-Profit”.
This definition intended to standardise the term “Not-For-Profit” across Commonwealth legislation replacing previous “non‑profit” expressions. However, this definition will be removed from the “in Australia” legislation and will not be proceeding. No further information is provided as to why the definition will not be included with the “in Australia” legislation.
If you would like more information regarding developments in the Charity Sector please contact Bill d’Apice or Anna Lewis of this office.