UBIT

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UBIT is deadJust weeks before the intended commencement of the “Better Targeting of NFP Tax Concessions” measure, the Acting Assistant Treasurer has issued a press release stating “the Government has considered alternatives to the previous government’s better targeting of not-for-profit tax concessions measure. We have concluded that they are not required at this time”. This news will be welcomed by many charities and not for profit organisations.

The Better Targeting of NFP Tax Concessions, commonly known as the unrelated business income tax (or UBIT), was introduced as part of the 2011-2012 budget and had been delayed for a number of years.Continue Reading The Unrelated Business Income Tax is (finally!) dead

piggy bankSummary – 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

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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.Continue Reading Impact of the Federal Budget on Australian Charities

Snooze buttonSummary – The Gillard Government has announced that the 2011-12 budget measure “Better Targeting of NFP Tax Concessions” will now commence from 1 July 2014.

On 31 January 2013 the Gillard Government announced that the Better Targeting of Not-For-Profit tax concessions legislation will now commence from 1 July 2014. Assistant Treasurer, David Bradbury MP said “this extension will enable further consultation and engagement with the NFP sector on this measure and ensure there is an opportunity for detailed stakeholder input to be provided.”

The purpose of the legislation is to ensure that tax concessions provided to NFP entities are targeted only at those activities that directly further the NFP’s altruistic purposes. Any activity pursued by a NFP entity that is deemed to be “unrelated” business will not be eligible for the tax concessions that the entity is registered for (including FBT, GST and DGR).Continue Reading UBIT start date deferred … again!!

Speaker at ConferenceSummary – Bill d’Apice and Kylie Maxwell presented to the NSW State Legal Conference on NFP structures and the reform agenda for charities and NFPs on 27 March 2012.

Bill d’Apice and Kylie Maxwell both gave presentations to many lawyers and sector representatives at the request of organisers of the NSW State Legal Conference. They addressed current issues affecting Charities and Not-For-Profits in relation to entity structures, public juridical persons, changes to the laws affecting Public Ancillary Funds, the proposed unrelated business income tax, proposals concerning “In Australia” requirements for certain entities and possible changes to governance requirements with the upcoming Australian Charities & Not-For-Profits Commission.Continue Reading NSW State Legal Conference

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:

For a new tax that has not received much NFP support the UBIT certainly has NFPs concerned
  • 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