A reminder to check your School Building Funds’ compliance with the ATO requirements.coinjar

School and College Building Funds may attract the attention of the ATO’s compliance program this year.  The ATO develops and implements its compliance program annually, which identifies key areas for its compliance activities for the financial year.  The compliance program targets areas of risk of non-compliance with taxation laws, which will be subject to greater ATO scrutiny for the year, to encourage greater compliance with taxation laws within the community.  School and College Building Funds have been identified as a potential area of focus for the 2016-2017 ATO compliance program.

In 2013, the ATO, on behalf of the Commissioner of Taxation, released Taxation Ruling 2013/2 which made significant changes to the ATO’s assessment of School Building Funds.  Managers of School Building Funds are encouraged to review their School Building Funds in light of the taxation ruling, and the possible ATO compliance focus this year, to ensure that their funds are complying with the ATO requirements.

Please do not hesitate to contact Bill d’Apice if you would like a review of your School Building Fund and its compliance with TR2013/2.

Click here to read our previous article on the Taxation Ruling and School Building Funds.

Bill d’Apice, Partner | +61 2 9233 9013 | wdapice@makdap.com.au

The ATO and ACNC are reminding charities and ancillary funds that the annual reporting period is fast approaching.

Charities

Charities registered with the ACNC (that have an annual year end of 30 June) have less than a week to submit their Annual Information Statement (AIS) to the ACNC. The AIS should be lodged via the online charity portal no later than 31 January 2017. We remind charities that the date their AIS is lodged will be displayed on the ACNC Register and a late AIS lodgement will be listed in red, to encourage charities to report on time.

Should you require any assistance with the preparation of your AIS or, if you would just like a review to double check the information that will be provided, please do not hesitate to contact us.

Ancillary Funds

Ancillary Funds registered with the ACNC

Charitable Ancillary funds were previously required to lodge annual reports with both the ATO and ACNC. However, recent changes to the reporting requirements of charitable ancillary funds have removed these dual reporting requirements. Accordingly, ancillary funds registered with the ACNC are now only required to lodge an AIS with the ACNC. This removes the separate reporting requirement to the ATO. Charitable Ancillary Funds have until 28 February 2017 to lodge their AIS with the ACNC.

Ancillary Funds not registered with the ACNC

Ancillary funds which are not registered with the ACNC must lodge an Annual Information Return with the ATO by 28 February 2017. Funds that are not able to lodge by the due date should contact the ATO on 1300 130 248 to seek an extension of time, as penalties will apply for applications lodged late without an extension.

Please do not hesitate to contact a member of our team if you require assistance with your charity or ancillary fund reporting.

Bill d’Apice, Partner | +61 2 9233 9013 | wdapice@makdap.com.au

Anna Lewis, Associate | +61 2 9233 9031 | alewis@makdap.com.au

The ACNC Commissioner has just released the ACNC’s Interpretation Statement on Public Benevolent Institutions. The Interpretation Statement provides guidance on the ACNC’s interpretation of the law pertaining to Public Benevolent Institutions (PBI) and insight into how the ACNC and its staff will assess a charitable organisation’s entitlement for endorsement as a PBI. The Interpretation Statement will be binding on the ACNC staff in making their determinations for endorsement of charitable organisations as PBIs and replaces the out of date, ATO tax ruling TR2003/5.

What is a PBI?

A PBI is a non-profit institution organised for the relief of poverty, sickness, suffering, distress, misfortune, disability, destitution or helplessness that arouses compassion in the community. Charitable organisations which are endorsed as PBIs, and continue to remain entitled to endorsement, enjoy endorsement as a Deductible Gift Recipient (DGR). DGR status is highly sought because it allows donors of the charity to receive a tax deduction for their donation. As a result of DGR status and the other tax concessions available to PBIs (such as FBT exemption), a PBI is a sought after registration for subtype charities.

Not for Profit, for the Public Benefit, and Providing Benevolent Relief

A PBI must be able to demonstrate to the ACNC that it is an institution established and carried on for public benefit, is subject to accountability and public control, and provides benevolent relief to persons afflicted by certain types of hardship recognised at law. The ACNC will consider the breadth of individuals the charity provides with benevolent relief within the identified areas of need. A charity which is broadly understood to assist the community (rather than persons in need) will not meet the threshold for endorsement as a PBI.

The ACNC will also consider whether the charity is accountable and subject to public control.  In its determination the ACNC will consider the number of unrelated responsible persons overseeing the charity’s activities. Whilst the Interpretation Statement is not prescriptive as to how many unrelated responsible persons  are required to satisfy the ‘public control’ element, the guidance provided indicates 3 or more responsible persons can often help substantiate compliance with the public control requirement of a PBI.

The Interpretation Statement indicates that a charity must also provide ‘benevolent relief’ to persons afflicted by hardship, however the charity need not itself directly give or provide the relief. The Commissioner’s Interpretation in this way, confirms the application of law in Commissioner of Taxation v Hunger Project Australia [2014] FCAFC 69 that organisations that provide relief via or in consultation with other organisations or associated entities (which also meet the PBI threshold), including organisations that primarily fundraise for other entities, may qualify for endorsement as a PBI. The provision of benevolent relief must, however, be the dominant objective of the charity. At law, ‘benevolent relief’ is considered relief to persons that would engender community compassion and support for the relief of the hardship or distress. A charity seeking PBI endorsement must be able to demonstrate a causal link between the activities of the charity for providing or coordinating the actual relief of the hardship (e.g. poverty) to the persons assisted by the charity. For more information regarding the Hunger Project case click here.

The ACNC further draws a distinction between PBIs and other charitable organisations which may provide meaningful support to persons who are suffering from ‘ordinary human experiences’.  Appendix A to the Interpretation Statement provides a number of practical examples of charitable activities of organisations, and may assist a number of charities seeking PBI endorsement understand why their meaningful work in the not for profit sector may not meet the specific threshold for PBI endorsement.

If you have any questions about this news item or need assistance with determining whether your charity should seek endorsement as a PBI please do not hesitate to contact a member of our team.

Bill d’Apice, Partner | +61 2 9233 9013 | wdapice@makdap.com.au

Anna Lewis, Associate | +61 2 9233 9031 | alewis@makdap.com.au

Last week, the ACNC launched a “Registered Charity Tick”. The tick may be used by charities registered on the ACNC Charity Register which are up to date with ACNC financial reporting requirements and meet the regulator’s governance standards. The tick will allow donors to easily identify registered charitable organisations complying with these requirements.

Ms Susan Pascoe, ACNC Commissioner, described the tick as a “visible badge of credibility” for charitable organisations. It is hoped that the tick will encourage public confidence in the charities and not for profit sector, by reminding donors that registered charitable organisations are subject to independent government regulation. The tick may also incentivise charitable organisations to meet ACNC requirements in a timely manner in order to access and maintain entitlement to the tick.

Charitable organisations registered with the ACNC are encouraged to log in to the Charity Portal and download their Tick.

acnctick

The ACNC Registered Charity Tick. Photo: ACNC

Should you have any questions in relation to the ACNC or any other matters please do not hesitate to contact a member of our team.

Bill d’Apice, Partner | +61 2 9233 9013 | wdapice@makdap.com.au

Most Charities will be aware that it is a condition of registration as a Charity (other than as a basic religious charity) that the Charity complies with the ACNC Governance Standards which have applied since 1 July 2013.

However, it is not enough that the Charity complies with the ACNC Governance Standards at the time of registration – a Charity’s registration is subject to their continuing to comply with the ACNC Governance Standards.

The Governance Standards are:

1. Charities must be not-for-profit and have a charitable purpose

The Charity should be able to demonstrate at any time (usually by reference to its governing rules) that it is complying with its purposes and its character as a not-for-profit entity.

However, over time a Charity may start providing different or additional services to those originally envisioned at the time of registration.  Although the Charity and its responsible persons may be acting in good faith and with the best of intentions, this may result in the Charity no longer complying with Governance Standard 1.

Therefore, it is worthwhile for the Charity to regularly review and update its governing rules.

Click here to read a case study.

2. Charities must be accountable to members

A Charity must take reasonable steps to ensure that it is accountable to its members and that its members are provided with an adequate opportunity to raise concerns about the governance of the Charity – primarily by providing regular reports and holding AGMs for members.

The Charity should also ensure that its governing rules contain provisions as to how the Charity will be held accountable to its members and what rights members have to voice concerns.  If the Charity can demonstrate compliance with these provisions, it would generally be found to have complied with Governance Standard 2.

Click here to read a case study.

3. Charities must comply with Australian laws

A registered Charity must not engage in any conduct which may be dealt with as an indictable offence or by way of a civil penalty of 60 penalty units or more.

4. Charity’s responsible persons to be suitable persons

A Charity must take reasonable steps to ensure that its responsible persons are suitable persons – in other words (except where authorised by the ACNC Commissioner) a responsible person may not be a person:

  1. disqualified from managing a corporation under the Corporations Act; or
  2. disqualified by the ACNC Commissioner  from being a responsible person of a charity in the previous 12 months.

The Charity must take reasonable steps to remain satisfied that its responsible persons are suitable – for example, by carrying out regular checks of the ASIC Disqualified Persons register.

Click here to read a case study.

5. Charities must take reasonable steps to ensure that their responsible persons comply with their duties

A Charity’s responsible persons are required to comply with certain duties similar to director’s duties under the Corporations Act, such as that they act in good faith in the best interests of the Charity, that they not misuse their position, that they disclose any conflict of interest and that they not allow the Charity to operate whilst insolvent.  The Charity is required to take reasonable steps to ensure that its responsible persons comply with these duties.

Charities should therefore ensure that their responsible persons are aware of their duties and put in place systems, policies and procedures to assist them in complying.

Protections are in place where it can be shown that a responsible person did take all reasonable steps to comply with their duties.

Click here to read a case study. 

The first step you should take when considering whether your are complying with the ACNC Governance Standards is a review of your governing rules to ensure that so far as possible by complying with its governing rules you are complying with the Governance Standards.

Please do not hesitate to contact us should you have any questions about your governing rules and ACNC’s Governance Standards.

Bill d’Apice, Partner | +61 2 9233 9013 | wdapice@makdap.com.au
Jennifer Paterson, Senior Associate | +61 2 9513 9531 | jpaterson@makdap.com.au

 

In our third issue of “Legal Questions for Every Charity and Not-For-Profit Organisation” we deal with the topic of Privacy. The update forms part of our series of short summaries of legal issues that we have noticed during the course of advising our clients are common and important to charities and not-for-profit (NFP) organisations.

PRIVACY 

Do you know whether your organisation is required to comply with the Privacy Act? Does your organisation have a compliant Privacy Policy and other measures in place to ensure compliance with privacy legislation?

Generally speaking, small businesses or not-for-profit organisations with a turnover of $3 million a year or less are exempt from having to comply with the “Australian Privacy Principles” under the Privacy Act and therefore are not required by law to have a privacy policy. However, there are a number of exceptions to this rule.

Even if you are not required to have a Privacy Policy, it is a good idea to have an up-to-date Privacy Policy in place, particularly if your organisation collects and uses personal information.

We recommend you consider the following:

Do you have a Privacy Policy? When was it last reviewed?

Does your policy accurately reflect how your organisation collects and uses personal information?

Is personal information safely and securely stored?

Is there someone in the organisation who can take on the role of a privacy officer, to deal with complaints and other privacy concerns from the public?

Please do not hesitate to contact us with any queries related to the Privacy Act or to discuss your Privacy Policy.

Bill d’Apice, Partner | +61 2 9233 9013 | wdapice@makdap.com.au
Belinda Marsh, Senior Associate | +61 2 9233 9083 | bmarsh@makdap.com.au

As advised in Issue 1: Governance, during the course of advising charities and not-for-profit (NFP) organisations over many years, we have noticed some common issues that are important to our clients. Over the next few months, we will continue to run a series of short summaries of those legal issues that every charity and not-for-profit organisation should consider.

This month we will deal with the topic of charitable tax concessions.

Charities and some NFP organisations may be entitled to receive a range of Federal and State tax concessions. It is important that you are familiar with these so you can take advantage of them. This may enable your organisation to free up capital to spend on your charitable or NFP objectives.

If your organisation is a charity it must be registered with the ACNC in order to be eligible to be endorsed by the ATO for Federal tax concessions.

In order to make sure your organisation is registered and endorsed for all the tax concessions that it is entitled to we recommend you consider the following:

Have you checked which Commonwealth tax concessions your organisation is currently endorsed to receive?
Click here for the ABN lookup.

Is your organisation registered as a charity with the ACNC? If so, it may be eligible to be endorsed for:
* Income tax exemption
* Goods and Services Tax (GST) concessions
* Fringe Benefits Tax (FBT) rebate
We recommend that all charities seek the above tax concessions.

Is your charity or NFP entitled to be endorsed for Deductible Gift Recipient (DGR) status?
DGR status is not available to all registered charities, only some limited categories of charities and NFP organisations are eligible to be endorsed to offer DGR receipts to donors. This is a very sought after tax status that is worth investigating. Click here to view ATO’s DGR table.

If your charity or NFP is endorsed with DGR status, is it entitled to receive and registered for FBT exemptions?
We note these are more lucrative than the FBT rebate.

Is your charity or NFP entitled to receive State, Territory or local government tax concessions? 
These are in addition to Federal tax concessions and may include stamp duty (a tax paid on some financial and property transactions), payroll tax (a tax on wages which exceed a certain threshold), land tax, and rates concessions (for local government council rates).

Your charity or NFP organisation may also be entitled to receive other tax concessions so please do not hesitate to contact us with any queries related to tax concessions that you might have.

As a Charity and Not-For-Profit (NFP) you rely heavily on the goodwill and reputation of your organisation which could take years of effort and investment to build.  It is therefore crucial for you to protect your names and brands, and this can be achieved by way of trade mark protection.

A trade mark is a “badge of origin”.  It is a way of distinguishing one trader’s business, goods or services from another.  An organisation’s name could potentially be a trade mark, as could its logo or the names of their goods or services.

If you are thinking about registering a trade mark for your Charity or NFP, we recommend you consider the following five points.

1. Why register a trade mark in the first place? 

A registered trade mark grants the owner certain exclusive rights pursuant to the Trade Marks Act.  You can use the trade mark for the goods and services to which the mark is registered and potentially stop others from using your mark or a mark that is deceptively similar.  Your registered mark will also prevent others from registering an identical or deceptively similar name as a trade mark in the same classes of goods and services.   Furthermore, a registered trade mark is also a piece of valuable intellectual property that charities and NFPs can utilise, including licencing to third parties.

When you have registered a trade mark, you can legally attach the symbol “®” next to the mark, to show the public that it is a registered trade mark.

2. I already have a domain name and/or registered a business name, do I still need to register a trade mark?

Domain names and business names have nothing to do with trade marks and give no trade mark rights or protections.

It is not a legal requirement to register a mark or name as a trade mark.  Others are not allowed to use your business name as their own without your permission and this is known as “passing off”.  However, while it is possible to protect your brand without registering the mark as a trade mark, it is often more difficult and expensive in the long run to run a passing off claim against third parties.

3. What should I register as a trade mark?

It is recommended that the name and logo associated with the name of your organisation should be registered as separate trade marks.  The trade mark of the name would be a word mark, whereas the logo would be an image mark, that would likely have distinctive graphics or symbols, layout and usually also the name of the organisation.

If your organisation operates ongoing services, recurrent events or produces certain goods with a distinctive brand or name, and you wishes for such brands to be protected, we recommended that you register the names and logos of such brands as trade marks.  For example, “CEO Sleepout”, being the name of a well known annual fundraising event to assist the homeless, is a registered trade mark owned by St Vincent de Paul Society National Council of Australia Inc.

4. Can my mark(s) be registered?

For a mark to be registered as a trade mark, it has to be “capable of distinguishing”, which means the mark has to be capable of distinguishing your goods and services from those of another trader.  Distinctive names, such as those containing made-up words (e.g. “Google”), portmanteaus (e.g. “Citibank”) or words that don’t relate to the goods or services (e.g. “Apple” for computer products), are easier to register as trade marks as they are capable of distinguishing the goods and services to which the name relate.

On the other hand, descriptive names would have a harder time being registered as a trade mark.  A name that is very descriptive of a good or service, for example, the name “Diabetes Awareness Fundraiser” as the name for a diabetes awareness fundraising event, is not distinctive and would have a hard time being registered as a trade mark.

When IP Australia examines a trade mark application, if it determines that the mark is not capable of distinguishing (or if there are any other issues, such as being too similar to an existing registered trade mark), it will issue an adverse report identifying the problems.  If the issues raised in the report are not overcome then the application will lapse and the mark will not be registered.

If your organisation is in the process of creating the brand for a new service or product, or it wishes to rebrand, we recommend that you consider obtaining legal advice before committing to a new name or logo, to see whether there may be any trade mark issues associated with registering the marks.

5. How do I register a trade mark?

Registration is carried out through IP Australia.  An application for trade mark is submitted to IP Australia along with the associated application fee.  An examiner will consider the application and either issue an adverse report if he or she determines that there is one or more issues with the application or else accept the application.  The accepted mark will be advertised for 2 months and if no opposition to registration is received from the public, then the mark can be registered once a registration fee is paid.

From 10 October 2016, there will be changes to the fee structure, with an increase to application fees payable but the removal of the registration fee.

It is important to get the application right, as once an application is submitted, it generally cannot be varied.  If a mistake is made, the process needs to be restarted and extra fees may need to be paid.

Given their reliance on goodwill and reputation, charities and NFPs should strongly consider protecting their brands through trade mark registration.  In the process of registering a trade mark, legal advice should be obtained to ensure that trade mark applications are drafted properly and they cover the right classes of trade mark.  Legal advice should also be obtained to deal with any adverse reports issued by IP Australia during the application process.

Procurement decisions are made by charities and not-for-profits regularly and can be the source of problems and expense if you don’t get the decisions right.

It’s important that you don’t think that suppliers won’t look to enforce their agreement just because you are a charity or a Not-for–Profit association.

Procurement has its pitfalls and you need to avoid a situation where you might sign up in haste and repent at leisure.

Money wasted on bad procurement decisions means money off the table for your association’s purposes.

We recommend the following tips to avoid problems:

1. Scope of works

Check carefully what it is that you want the supplier to supply and then make sure that the contract covers it. This sounds simple but is often the cause of problems.

2.  Capacity

Make sure that the supplier can deliver the services you want. Confirm the supplier’s capacity to deliver by way of references or sector reputation.

3. Escalation of fees

Check carefully to ensure that there is no automatic escalation of fees which may make the contract onerous in future. Some suppliers will offer discounts over the first year to entice you with significant increases in later years.

4. Exit arrangements

Make sure that you have the capacity to terminate the agreement on reasonable notice without penalty where possible.

5. Automatic renewals

Check carefully to see that the contract does not contain automatic rollover provisions where you may not want them. If there are automatic rollover provisions, make sure that you have capacity to terminate without cause.

6. Test pricing

Undertake a comparative analysis to ensure that you will be getting good value for the services the contractor will provide.

7. Get advice

The big print giveth and the small print taketh away. Make sure that you get advice to ensure that you understand all of your contractual obligations and entitlements.

Please don’t hesitate to contact Bill d’Apice or any one of the lawyers in our Charities & Not-for-Profit team should you require any advice or assistance.

Bill d’Apice, Partner | +61 2 9233 9013 | wdapice@makdap.com.au

During the course of advising charities and not-for-profit organisations over many years, we have noticed some common issues that are important to our clients.

Over the next few months, we will run a series of short summaries of those legal issues that every charity and not-for-profit organisation should consider.

This month we will deal with the topic of governance.

It is important that your organisation is well managed so it can focus on its mission and purpose. We recommend you consider the following:

Do you have a governing document (e.g. constitution) that aligns with your activities? Charities registered with ACNC could risk losing the charitable status (and tax concessions) if they undertake activities that do not fit within the stated objects in their governing document.

When was the last time you reviewed your governing document? It is useful to review your constitution periodically to ensure compliance and appropriate governance arrangements, and if your organisation is registered with the ACNC is the most recent version of your constitution uploaded onto the ACNC Register?

Are processes for appointment or election of directors and office bearers clear?

Is there a maximum term for directors to promote some turnover on the Board?

Have you identified what skills are required for your directors and whether these must be taken into account when appointing or electing directors?

Does the Board receive presentations on governance and regulatory issues?

Does the Board have appropriate committee structures?

Are reports from management to the Board appropriate? Are directors informed about key financial issues?

Is there a strategic plan in place? If so, does management report to the Board on performance against the key items in the strategic plan?

Does your constitution contain appropriate winding up provisions and, if your organisation is a DGR, does it contain appropriate provisions for surplus DGR funds if DGR endorsement is revoked?

Do you have a dispute resolution mechanism and is this appropriate for your needs?

Do you have an appropriate and effective mechanism for disclosing conflicts of interest?

What internal systems do you have, to manage and prevent fraud? Are these adequate? 

Please do not hesitate to contact us for any advice regarding best practice, meeting governance standards and managing board conflicts.

Bill d’Apice, Partner | +61 2 9233 9013 | wdapice@makdap.com.au
Anna Lewis, Associate | +61 2 9233 9031 | alewis@makdap.com.au