On 11 July 2018, the ATO published draft Tax Ruling TR 2018/D2 – Fringe benefits tax: benefits provided to religious practitioners.

The public is invited to provide feedback to TR 2018/D2 until 24 August 2018.

On the same date TR 2018/D2 was published, the ATO’s previous Tax Ruling on this topic – TR 92/17 – which was published in 1992 was withdrawn.

Since 1992, there have been numerous changes to both the law and to the nature of contemporary religious practice – the most significant of which is the establishment of the Australian Charities and Not-for-profits Commission (ACNC) in 2012.

The establishment of the ACNC means that determining whether an entity is a religious institution is now as simple as checking whether it has been registered as a charity with an “advancing religion” sub-type.

TR 2018/D2 contains a number of examples of contemporary real life scenarios to help understand whether benefits provided to religious practitioners are in respect of their pastoral duties or for directly related religious activities and therefore exempt from fringe benefits tax.

Although TR 2018/D2 is still in draft Ruling, the ATO has advised that it may be relied upon to the extent that if a person underpays tax as a result of them relying upon the
Ruling, they will still have to pay the correct amount of tax once known but will not have to pay any interest or penalties that would otherwise be applicable.

Please don’t hesitate to contact us if you would like to discuss the draft Ruling or its application to you or if you would like any help submitting feedback to the draft Ruling.

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.

Road worker holding "Slow" signThe Government has just announced the delay of the commencement of the ACNC and the setting up of a working group to work through major tax reforms for the Not-For-Profits sector.

The Assistant Treasurer announced on 1 March 2012 that the ACNC will not commence operation until 1 October 2012.

The Assistant Treasurer and Minister for Social Inclusion acknowledged that the legislative reform that is planned needs to be responsive to feedback from the Not-For-Profit sector about the proposed legislation.  The Government wishes to take the extra time to ensure the legislation and guidelines reflect this feedback when they are released.

If Not-For-Profit organisations have questions about the delay, they can be directed to Treasury at nfpreforms@treasury.gov.au.  At the very least, Not-For-Profit organisations may wish to ask whether the government is reconsidering the proposed requirement to have a registered company auditor to review or audit the financial reports of certain charities under the new legislation.

Both the Assistant Treasurer and the Minister for Social Inclusion have also announced the creation of a Working Group to discuss reform of the taxation laws regarding GST, FBT and DGR endorsements.  The aim of the Working Group is to achieve better and fairer taxation reform for the Not-For-Profit sector by December 2012.

Keep poised for updates from our blogs when further details come to hand.