Not-for-Profit Stewardship Group key messages 12 July 2023

Key topics discussed at the Not-for-Profit Stewardship Group meeting 12 July 2023.

• Second Commissioner’s address
• NFP centre
• Treasury
• ACNC
• New ato.gov.au platform
• Single touch payroll
• The double giving agenda
• Enhancing transparency of income tax exemptions
• Attendees
• Guest attendees
• Apologies

Second Commissioner Jeremy Hirschhorn highlighted the importance of stewards working together to shape effective administration. Members provide a critical voice for the large not-for profit (NFP) sector which plays an important role in the Australian economy.

NFP centre

Web guidance will be updated shortly to include a page on reporting requirements for NFPs to self-assess their income tax exemption. The mutuality guide will also be reviewed.

Post meeting update – web guidance is now live Reporting requirements to self-assess income tax exemption.

Some older rulings will be refreshed over the coming months and into 2024. We will run small working groups to test language and examples. This approach has worked effectively and has been well received by the community in the past.

Taxation Ruling TR 2013/2 Income tax: school or college building funds. This ruling and related web guidance are being reviewed to reflect the Federal Court decision in Decision Impact Statement The Buddhist Society of Western Australia Inc v Commissioner of Taxation (No 2).

• Taxation Ruling TR 95/27 Income tax: public funds
• Taxation Ruling TR 2000/10 Income tax: public libraries, public museums and public art galleries (PDF 133KB)This link will download a file

We are expecting enquiries to increase this year due to significant reforms in 2023 and 2024. We are committed to working with the sector.

New measures update

Deductible Gift Recipient (DGR) Registers Reform

On 28 June 2023, the Treasury Laws Amendment (Refining and Improving our Tax System) Act 2023 became law. The amendments to the Income Tax Assessment Act 1997 transfer the administrative responsibility of 4 unique DGR categories from other government departments to the ATO.

The changes take effect from 1 January 2024 and repeal provisions that require each department to maintain a separate register.

Updating guidance will be key to a smooth transition.

We have been working closely with the other government departments to ensure clear pathways for applications in progress. Guidance on the application process will be updated.

Member comments

• Members asked whether there will be further information on the donation of unlisted shares. The ATO advised it will review its web content for donors on the valuation process and make updates as required.
• Justice Connect receives great feedback on the NFP Centre and the assistance it provides to clients. The ATO will share the feedback with its teams who work hard to support the sector.
• Members asked what is driving DGR revocations. The ATO advised it has revoked DGRs that are no longer eligible for endorsement under the DGRs required to register as a charity measure.

Treasury

Building Community – deductible gift recipient status for community foundationsExternal Link. The government is consulting on the Treasury Laws Amendment (Measures for Consultation) Bill 2023: New class of deductible gift recipients to implement the decision to provide DGR status to up to 28 community foundations affiliated with Community Foundations Australia.

The consultation closes on 16 July. It is a short consultation due to drafting pressures.

The endorsement will be facilitated under a hybrid model and will only apply to the 28 community foundations listed in the legislative instrument. Endorsement will provide longevity to these community foundations. The model may be applicable to other entities.

We are working on a draft for greater disclosure under the ACNC secrecy provisions. The Minister is committed to public consultation on this matter.

We have been working with Department of Social Services on doubling philanthropic giving and the sector development blueprint. The Blueprint Expert Reference Group (BERG) has been tasked with developing an issues paper. This will form the basis for broad consultation on the development of an NFP sector development blueprint.

Refer The Blueprint Expert Reference Group (BERG) latest updatesExternal Link for progress on the issues paper

Member comments

• Members questioned whether community foundations will be able to carry out activities. Treasury confirmed community foundation DGR endorsement can be provided to item 1 DGRs and they can be involved in activities.
• Members asked if an activity comes under one or more of the 52 general DGR categories, whether a community foundation can give to another organisation carrying out that activity, even if it is not an item 1 DGR. Treasury confirmed this is correct.

ACNC

There will be a new Assistant Commissioner as Anna Longley has left The Australian Charities and Not-for-profits Commission (ACNC).

Guidance on Related Party TransactionsExternal Link has been issued. From the 2023 Annual Information Statement onwards, all charities (except Basic Religious Charities) are required to report on their related party transactions. Feedback indicates guidance could be simplified.

The annual Australian Charities Report – 9th EditionExternal Link has been released.

• Data shows that $13.4 billion of charity revenue is made up of donations and bequests.
• Charities distributed $9.7 billion in grants and donations.
• Data confirms nearly one fifth of registered charities are grant makers.
• Total revenue reported to the ACNC rose to $190 billion, an increase of $14 billion on the previous year. Whilst the number of people giving has not increased, donations increased by $676 million to a total of $13.4 billion.
• Volunteers continue to underpin the work of the sector and 50% of charities operate with no paid staff. There has been a decrease in number of people volunteering due to Covid-19. People are also volunteering in different ways.
• 4% of charities didn’t undertake activities during the year and of that figure 44% indicated it was due to Covid-19.

The Commissioner's Interpretation Statement: Health Promotion CharitiesExternal Link (CIS) has been released. The CIS does not narrow the interpretation of Health Promotion Charities (HPC). Theoretically HPCs registered will stay registered. A HPC is ‘an institution whose principal activity is to promote the prevention or the control of diseases in human beings’. Other activities such as administrations functions are ancillary to the principal activity.

The Public Benevolent Institution CIS is close to being released as the final version. We have conducted extensive consultation on this matter and believe the CIS will be very clear.

From 1 May 2023, charities intending to fundraise in Queensland will only need to notify the QLD Office of Fair Trading by submitting a charity ACNC registration notification formExternal Link. The ACNC welcomes further fundraising red tape reduction in QueenslandExternal Link.

Member comments

• Members asked whether the ATO is cross-referencing what individuals claim in their tax returns and what DGRs receive, as the ATO has referred to making better use of ACNC AIS data. The ATO advised its systems have internal risk filters for checking donations in tax returns and taxpayers may have to provide evidence for what they are claiming.

New ato.gov.au platform

The ATO is aiming to design a better experience and modern platform with a data driven approach. The platform is built with a new information architecture.

We consulted with 1,000 NFPs to understand their core needs. The feedback was for something simple and easy to use.

The website will have 3 major headings (down from 6):

• Individuals and families
• Business and organisations
• Tax and super professionals.

NFP will be located under Business and organisations.

The search function is anchored.

The website will have a new look and feel, but the actual content is not changing. All links will work when the website goes live on 4 December 2023.

Member comments

• Members asked whether an artificial intelligence (AI) model is being built into the website. The ATO advised its focus right now is ensuring content is correct and well tagged. It is looking at what others are doing with AI.

Single touch payroll

On 2 May 2023 the Australian Government announced that from 1 July 2026, employers will be required to pay their employees’ superannuation at the same time as their salary and wages, Payday superannuation.(Payday Super)

The team working on Payday Super will engage and consult with stakeholders. The consultation, Increasing the payment frequency of superannuation guarantee is registered on ato.gov.au

Treasury will consult separately on the policy for Payday Super.

We are looking to enhance how we match and store single touch payroll and member account transaction service data to proactively support employers to manage super guarantee (SG) compliance under the current rules.

SG payments must be received by the employees’ fund on or before the due date. This means employers need to make the contribution before the due date. If employers use an intermediary, like a commercial clearing house, they should know how long the payment process takes and factor that into their payment timeframes.

The double giving agenda

Philanthropy Australia presentation

Philanthropy is important as it leads to a better society. There’s power in community led change and philanthropy promotes better sharing of wealth.

Results from the Redbridge polling and focus groupsExternal Link polling of more than 2,500 people across Australia reveals very strong support for initiatives to increase giving in Australia. It suggests a keen and open-hearted generosity is alive in the community and that there has been a significant change in sentiment towards a more compassionate approach across society. The survey showed that 74% of respondents agree or strongly agree that 'giving brings people together and strengthens our sense of community'.

Three key pillars or motivations emerged:

• Personal connection – people are motivated to give where they have an emotional connection to a cause.
• Agency – people are motivated to give when they can choose to give on their own terms, including when and how much (money or time) they give.
• Community – the act of giving makes people feel part of a bigger (cohesive) community and connects to an Australian identity of mateship.

Government has a role to play in fostering giving, as philanthropy reaches places the government cannot. Philanthropy amplifies the impact of government and improves national wellbeing and productivity.

Key points for consideration:

• What reforms should we advocate for?
• The government’s policy is to double giving by 2030. What are the implications for the ATO? What will the ATO contribute?
• What can each of us contribute?

Further information, A Strategy to Double Giving by 2030External Link.

Enhancing transparency of income tax exemptions

From the 2023–24 income year, non-charitable not-for-profits with an active ABN will be required to lodge an annual self-review return to access an income tax exemption.

The first return is required to be lodged between July and October 2024 using the existing ATO online and secure platform, Online services for business and Online services for agents.

The annual self-review return is currently under development and user testing will commence shortly. The return will comprise questions that guide NFPs to review their purpose and activities against specific eligibility requirements of an income tax exempt entity.

Members were presented the draft prototype return. Feedback from this session will be used to streamline the return.

The new legislation page Not-for-profits – enhancing the transparency of income tax exemptions has updated information on how NFPs can get ready for the reporting changes by self-assessing their tax status now and getting digital ready.

Stay tuned for a dedicated web page to be published soon on Reporting requirements to self-assess income tax exemption.

Post meeting update: Reporting requirements to self-assess income tax exemption is now live on ato.gov.au

If you have any questions or feedback, email nfpstewardshipgroup@ato.gov.auThis link opens in a new window

Attendees

Guest attendees

Apologies