Action item update
The ATO Prefill Project Team held interviews with sector representatives to understand and consider the practical opportunities for prefilling donation data on individual tax returns.
Member comments
A member who participated in an interview, noted it was a good conversation covering the pros and cons of the initiative.
Treasury
Australian Charities and Not-for-profits Commission (ACNC) Governance Standard 3
The regulations to amend Governance Standard 3 are currently before the Parliament.
The regulations empower the Commissioner to investigate charities that engage in or use their resources to actively promote serious unlawful acts of trespass, vandalism, theft or assault and threatening behaviour, and to take enforcement action if warranted.
The regulations are the subject of several disallowance motions which will be considered by the Senate on 25 November.
The Transparency Code
The government is collaborating with the Fundraising Institute of Australia (FIA) to build on the FIA Code mechanism to improve the transparency of the use of charitable donations during natural disasters.
Reform of the ACNC secrecy provisions (Recommendation 17 of the ACNC Review)
Treasury concluded a public consultation on 22 August 2021 which generated 25 written submissions.
Stakeholders supported disclosure of finalised investigations and compliance action:
- disclosure of registration/refusal decisions also received general support
- many stakeholders raised concerns around disclosure of information around new or ongoing investigations.
The government is considering its position.
Public Ancillary Fund guidelines
Current Public Ancillary Fund (PuAF) guidelines 2011 are set to sunset on 1 April 2022.
The draft 2022 PuAF guidelines have been released for consultation and close on 9 December 2021.
There is one substantive change – public and private ancillary funds will be able to seek a merit review of the Commissioner of Taxation’s decisions on applications for a lower minimum annual distribution rate.
ACNC
Australian Charities and Not-for-profits Commission Amendment (2021 Measures No. 3) Regulations 2021
These regulations will facilitate the implementation of three recommendations from the ACNC Legislation Review:
- Recommendation 12 increases the annual revenue thresholds defining small, medium, and large registered charities from the 2022 reporting period onwards. The key changes to note are
- A small entity is currently less than $250,000 and the new threshold will be less than $500,000.
- A medium entity is currently $250,000 to less than $1 million, and the new threshold will be $500,000 to less than $3 million.
- A large entity is currently $1 million or more and the new threshold will be $3 million or more.
- Increased reporting thresholds represent a significant reduction in red tape for some charities.
- A number of charities will move from a large to medium charity for ACNC reporting, which will mean that they will be able to have their financial statements reviewed rather than audited.
- A number of charities will also move from a medium to a small charity for ACNC reporting, which will end the requirement to submit financial statements to the ACNC and they will only need to complete an Annual Information Statement (AIS).
- Recommendation 14 requires all registered charities (except Basic Religious Charities) to disclose related party transactions in the AIS from the 2023 reporting period onwards. Medium and large charities will need to include this in financial reports from the 2022–23 financial year onwards or the relevant substituted accounting period (if applicable).
- Recommendation 15 requires large registered charities to disclose, on an aggregate basis, remuneration paid to responsible persons and senior executives unless the charity has only one such person. This applies from the 2022 reporting period onwards.
Member comments
Members queried what the AIS form will look like and how charities will provide the information about related party transactions. The ACNC advised the AIS form has not been finalised but reporting will include the ability to add notes, as required about how key management personnel are defined.
More information was requested around the intent of the key personnel remuneration recommendation, who is covered by the remuneration disclosure requirements, and how key management personnel are defined. The ACNC advised the definition of personnel captured by the remuneration disclosure aligns with the accounting standards for key management personnel and includes responsible persons such as chief executive officers.
ACNC website
The ACNC is launching an enhanced search functionality for the Charity Register whereby a charity may be searched for by their charity program, beneficiaries, or their location.
Members received a walkthrough of the site which is due to go live within a few weeks. It will include the following features:
- enhanced search functionality and use of natural language to search across the charity sector
- randomised search results to ensure no specific preference in result list
- search by city or suburb to find charity organisations and services with a map view
- search by charity to view all services provided by a specific charity organisation
- spelling correction function.
Member comments
Members queried what data is provided by charities for use by the ACNC in the search function, and if the data or search results can be downloaded or exported to Excel.
The ACNC advised charities can include information for up to 10 programs and multiple locations. As this is a new initiative, there may be a lack of understanding of the type of information that needs to be provided. Charities may change the way they describe their programs over time to enhance searchability. The data or search results cannot be exported or downloaded.
NFP Centre
The Not-for-profit (NFP) Centre is focusing on delivering key strategic initiatives, such as providing clear guidance that supports NFPs to self-serve and unlocking more real-time data to identify issues and mitigate risks.
A key focus is on sharing information through communication products, including through the NFP newsletter and LinkedIn blogs, to inform the sector about what attracts our attention and to build an understanding about what NFPs need to do to meet their obligations.
New measures
Treasury Laws Amendment (2021 Measures No. 2) Act 2021 received Royal Assent on 13 September 2021 with a start date of 14 December 2021.
It amends tax law to require all deductible gift recipients (DGRs) to be a registered charity, an Australian government agency, or operated by a registered charity or Australian government agency.
Of the 27,900 DGR endorsed entities, less than 2,000 will be affected by the new requirements.
Existing endorsed DGRs have up to 12 months to register as a charity up to 14 December 2022.
A further three year extension is available to eligible DGRs by applying to the ATO. They will need to meet prescribed criteria set out in the Legislative Instrument.
Members are invited to provide feedback on the flow and usability of the draft Three-year extension application form – interest to be forwarded to the NFP Stewardship Group secretariat.
A webinar will be held on 9 December 2021 outlining the changes and what it means for DGRs.
We will continue to work with peak associations and stakeholders to tailor communications and engage DGRs with more complex circumstances throughout 2022.
NFP roadmap
The NFP Centre has been reviewing feedback and contributions from the design session in July. The purpose is to develop a draft vision statement and define the key elements of what an efficient and effective administration for NFPs looks like in five years and beyond.
Members will be invited to participate in smaller collaborative groups in 2022 to validate the vision statement.
NFP focus areas and strategies
We are strengthening our understanding of risk and the drivers of certain behaviours of concern. Our key focus areas and what attracts our attention are shared regularly through our key communication products. These areas of focus include:
- eligibility for and annual self-review for self-assessed income tax exemption
- meeting ancillary funds minimum annual distribution requirements and adhering to the guidelines
- eligibility for and accurate claiming of franking credit refunds
- operating for purpose
- accurate application of mutuality and the correct classification of taxable NFPs.
Strategies that support clients by making it easy to comply, and hard not to, are critical. These are focused on:
- providing the right level of support to clients
- engagement activities that are intentionally differentiated in order to bring about shifts in behaviour across a disparate client base and diverse set of behaviours – targeted engagements, including review and audit cases, are just one part of our treatment strategies
- increasing the confidence of government and the community that the NFP sector is operating for purpose, meeting its obligations, and accessing concessions correctly.
NFP research
Research has been undertaken to validate and update our understanding of the unregistered NFP population.
While the research is yet to be finalised, initial observations indicate that the unregistered population may be smaller than what has been estimated in prior studies and generally comprised of smaller entities that may or may not be required to have an active Australian business number (ABN).
The indicative lower number of unregistered NFPs may also be reflective of the need to meet public liability obligations, brought in over the last 20–30 years, being a key driver to register with an ABN.
Once available, the final report will be shared with the sector and relevant forums.
Technical update
The Buddhist Society of Western Australia Inc versus Commissioner of Taxation Federal Court decision was handed down on 4 November 2021.
The decision impacts the administration of the DGR category for school building funds.
We will keep the sector informed on any updates, including the potential for a review of the current ruling.
Members are to inform the Not-for-profit Stewardship Group (NFPSG) secretariat if they are interested in contributing to any consultations on the ruling.
Member comments
Members noted an updated definition of the meaning of a school may be needed to support the sector.
eInvoicing overview and progress update
EInvoicing is a standardised, digital exchange of invoice data between a buyer’s system and supplier’s system via a secure network. In Australia, the common standard is Peppol. Peppol offers eProcurement standards and specifications. It is used globally in almost 40 countries (Australia, New Zealand, Singapore, and Japan have adopted in our region) and it has been in operation for 13 years.
Eighty percent of Australian government agencies are ready to receive eInvoices, with eInvoicing mandated from 1 July 2022. In addition, the NSW Government has mandated eInvoicing for all state agencies from 1 January 2022.
Work is underway to increase small business awareness of eInvoicing and its benefits, with an advertising campaign planned for mid-2022. Delays to implementation have been encountered due to COVID-19 lockdowns and the need to prioritise the implementation of Single Touch Payroll Phase 2 and COVID-19 stimulus measures. Major small business software providers offer eInvoicing functionality either as a fully integrated solution or via third party apps.
Large businesses are also adopting eInvoicing, including retail, telecommunication, energy, and other sectors.
The project team is seeking feedback from members on:
- eInvoicing in the NFP setting, that is, whether the NFP sector invoicing processes differ from profit-based businesses
- recommendations on NFPs that may benefit in engaging with us in a pilot (larger entities with high volume of invoices)
- any other factors or issues relevant to the sector to be considered.
The NFPSG secretariat will issue an email to the group seeking interest in a consultation process.
Other business
The NFPSG membership refresh will be finalised by the end of 2021, with new members expected to be announced in-time for the first scheduled meeting in March 2022.
Member comments
NFPs will need to get updated with an unexpected change to electoral disclosure rules, which was introduced to the House of Representatives in the week commencing 22 November 2021.
The Office of the Registrar of Indigenous Corporations is consulting on changes for financial reporting by indigenous corporations, which is also aligned to ACNC reporting thresholds.
The ATO reached out to indigenous stakeholders to seek interest for NFPSG membership. Interest has been low. We will look to engage further to create awareness of what the NFPSG is about, what we do and how they may add value to the group.
Attendees
|
Organisation |
Member |
|---|---|
|
ATO |
Louise CLarke (Co-chair), Private Wealth |
|
ATO |
Jennifer Moltisanti, Private Wealth |
|
Arnold Bloch Leibler |
Joey Borensztajn |
|
Australian Charities and Not-for-profits Commission |
Anna Longley |
|
Australian Council for International Development |
Joe Zabar |
|
Australian Institute of Company Directors |
Phil Butler |
|
Centre for Social Impact, Swinburne University of Technology |
Krystian Seibert |
|
Clubs Australia |
Simon Sawday |
|
Community Council for Australia |
David Crosbie |
|
CPA Australia |
Ram Subramanian |
|
Giuntabell |
Nunzio Giunta |
|
Judy Sullivan Consulting |
Judy Sullivan |
|
Justice Connect |
Sue Woodward |
|
The Salvation Army Australia |
John McIntosh (Co-chair) |
|
The Tax Institute |
Bridgid Cowling |
|
Treasury |
Jacky Rowbotham |
|
University of NSW Business School |
Fiona Martin |
Guest attendees
|
Organisation |
Attendee |
|---|---|
|
ATO |
Frances Gobel, Private Wealth |
|
ATO |
Gary Issar, Private Wealth |
|
ATO |
John Churchill, Tax Counsel Network |
|
ATO |
Larissa Walker, Enterprise Solutions and Technology |
|
ATO |
Len Hertzman, Tax Counsel Network |
|
ATO |
Marisa Hewitt, Private Wealth |
|
ATO |
Reveka Kotsiaris, Enterprise Strategy and Design |
|
ATO |
Rowan Fox, Policy, Analysis and Legislation |
|
Prolegis Lawyers |
Jae Yang |
Apologies
|
Organisation |
Member |
|---|---|
|
Australian Federation of Disability Organisations |
Ross Joyce |
|
Law Council of Australia and New Zealand |
Jennifer Batrouney |
|
Prolegis Lawyers |
Anne Robinson |