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
Summary – The High Court handed down its decision in Commissioner of Taxation v Bargwanna on 29 March 2012 ruling that trust funds in a charitable trust must be applied for the purpose of the charitable trust, and not just “substantially” or “on the whole”.
On 29 March, the High Court handed down its decision in the long running case of Commissioner of Taxation v Bargwanna allowing the appeal by the Commissioner of Taxation.
Mr and Mrs Bargwanna were the trustees of the “Kalos Metron Charitable Trust”. Between 2003 and 2007, the trustees distributed a total of $293,914.55 to numerous charitable cases.…
Summary – The Assistant Treasurer has issued a further Exposure Draft on proposed legislation restating and standardizing special conditions for tax concession charities including the “In Australia” conditions.
The Assistant Treasurer has now released a further Exposure Draft of legislation restating and standardising special conditions for tax concession entities and, in particular, refining the “In Australia” special conditions.
Under the current law, tax concession charities and deductible gift recipients have different requirements concerning their obligations to operate “In Australia” to access tax concessions.…
Summary New laws introduced on 1 January 2012 change the way public ancillary funds are structured, operated and wound up.
On 1 January 2012, new laws governing the definition and operation of public ancillary funds came into force. The definition is now the cornerstone for organisations seeking to have their ancillary fund endorsed by the Australian Taxation Office as a deductible gift recipient.
- new Public Ancillary Fund Guidelines 2011 (the Guidelines) now apply to certain public ancillary funds;
- the Guidelines stipulate minimum levels of distributions from the public ancillary fund during a financial year;
- the Commissioner now has powers to suspend and remove trustees of certain public ancillary funds, and appoint acting trustees in circumstances where the Guidelines are not complied with;
- the legislation transitions most public ancillary funds into being managed by corporate trustees which meet certain constitutional criteria;
- administrative penalties apply for breaches of certain rules in the Guidelines;
- such administrative penalties can be imposed on directors of the corporate trustee in certain circumstances; and
- there is a “phase-in” period specified for public ancillary funds that are already endorsed as deductible gift recipients.
There was a flurry of activity in relation to tax provisions in the first half of 2011. As a result the Government appears to be fully occupied digesting the numerous comments provided by charities and NFPs, their advisors and the broader community. The following tax related issues have received attention:
- The Unrelated Business Income Tax (UBIT). UBIT seeks to tax the non‑core income of charities which is not applied for their altruistic purposes. Even though the UBIT tax was announced by the treasurer as being effective in some cases on 1 July 2011, the rules are still unknown! We understand there were a significant number of submissions lodged and they overwhelmingly rejected the tax. In fact, we have not been able to identify a submission supporting the proposed tax.
View our submission (pdf).
In our view:
- the UBIT is unlikely to raise significant revenue.
- there have also been no examples of significant abuse of the existing system.
- furthermore, the existence of a UBIT will undoubtedly result in significant additional administrative expenses to charities and NFPs distracting them from their principal altruistic purposes.
- this is an unnecessary and bad tax.
Continue Reading Tax Reform for Charities: UBIT is Coming