Treasury
Consultation on the exposure draft legislation and explanatory materials for Strengthening the ABN systemExternal Link closed on 29 November 2022. A not-for-profit (NFP) roundtable was held to discuss sector specific issues. Legislation is anticipated to progress in the new year.
Work continues on progressing 2022 federal election commitments, including:
- Treasury engaging with the Department of Social Services to settle scope and governance of the philanthropy and community sector blueprint – more details are expected to be released in the 2023 Budget
- the Productivity Commission developing Terms of Reference which will guide the review into philanthropic giving and how it may be doubled by 2030 – while timelines are yet to be settled, it is expected to involve a broad consultative process.
Member comments
- Members queried progress on ancillary fund proposals after the consultation held in 2022.
Treasury confirmed submissions have been reviewed, with several processes being worked through with new government Ministers. Members are invited to reach out to Treasury if they have any further suggestions.
- When will a new iteration of draft legislation be made available for the Strengthening the ABN system reforms?
Treasury advised that the review of submissions is, however a new draft would not be expected before 2023.
- A member questioned what the NFP sector impacts would be regarding the application of the Multinational Tax Integrity: Public Beneficial Ownership RegisterExternal Link, as public consultation opened in November and closes on 16 December 2022.
Treasury noted the reform is a government election commitment and the consultation paper outlines proposed design features. Submissions from NFPs will help to uncover any potential issues that may impact the sector.
- A member observed that the Productivity Commission process mentions a review into incentives but is yet to outline more detailed timeframes for doubling structured giving.
Treasury noted it is early in the policy development stage. The Hon Dr Andrew Leigh MP, Assistant Minister for Competition, Charities and Treasury is seeking a genuine partnership with the sector, and a less prescriptive approach is being taken to encourage the sector to put forward ideas. Members advised the sector has an appetite to hear more, and an announcement or release of information about doubling structed giving would be of value.
The ATO advised that the NFP Roadmap will also be revisited once the Productivity Commission Terms of ReferenceExternal Link and the Philanthropic Blueprint have taken shape.
ACNC
Sue Woodward has been appointed the new Commissioner of the Australian Charities and Not-for-profits Commission (ACNC) and will commence in the role from 12 December 2022.
The ACNC celebrated its tenth anniversary on 3 December 2022 at the Koorie Heritage Trust. They give thanks to all who joined the celebration. The Hon Dr Andrew Leigh MP, Assistant Minister for Competition, Charities and Treasury attended and delivered a speechExternal Link virtually.
Two new online courses were released on 5 December 2022, bringing the total number of courses in the ACNC learning program to 12. While these materials are pitched toward the needs of charities, feedback has shown NFPs also find them useful. One of the courses released today includes short and practical ‘How do I’ videos that step through navigation of the Annual Information Statement.
Consultation continues on the Commissioner’s Interpretation Statement: Public Benevolent Institutions, with another workshop planned for December. The Statement will be finalised in 2023, noting that it remains a priority for the ACNC. The Commissioner’s Interpretation Statement: Health Promotion Charities will be published in 2023.
In the 2023 Annual Information Statement, charities will need to report related party transactions. The ACNC is continuing to consult on inclusions through to February or March in 2023.
Member comments
- Is there an update available on the ACNC Advisory Board selection process?
Treasury advised after the expression of interest issued around 300 applications were received from qualified applicants which are currently being assessed.
NFP Centre
To supplement the NFP overview presentation we are looking to develop and run a series of tax basics webinars, to provide more depth on topics such as GST, fringe benefits tax, and deductable gift recipient (DGR) categories. More details will be available in 2023.
The draft Practical Compliance Guideline PCG 2022/3 Goods and services tax and residential colleges - ATO compliance approach closed for consultation on 30 September 2022 and will apply to tax periods starting from 1 January 2023.
- Overall, feedback indicates the PCG has been well received, with some colleges finding their GST outcome is higher compared to the outcome under the tool.
- This is a voluntary guidance product, it is not compulsory and colleges can get valuations if they prefer.
- While the residential colleges tool has been withdrawn from market, clients may request to use the tool for another year if they have exceptional circumstances, such as when a college has already set its price. Colleges will need to provide financials to support their request.
We are continuing to develop contemporary NFP examples that may be incorporated into Goods and Services Tax Ruling GSTR 2012/2 Goods and services tax: financial assistance payments. The ATO view has not changed, and we are aiming to provide an update shortly. Thank you to our NFP Stewardship Group members for assisting with this update.
The ATO is deploying a new agent feature in Online services for business. This feature enables clients to nominate a new agent upon initial engagement or a change to an existing agent. Once done, the nominated agent can then add the client in Online services for agents. It is a fraud prevention program that will ensure only authorised agents can link clients, which is being deployed over 4 phases:
- Phase 1 – October 2022 saw the initial pilot roll-out to larger public and multinational businesses
- Phase 2 – from December 2022 roll-out to most remaining large businesses and multinationals
- Phase 3 – from March 2023 roll-out to small business clients, low end private wealth clients and remaining taxpayers from superannuation, NFP and other markets
- Phase 4 – yet to be designed and expected to roll-out to individual clients.
Member comments
- A member requested more detail around the process for nominating an agent, and if an NFP would need to be set-up electronically.
The ATO noted that completing the nomination in Online services for business would require set-up of a Digital Identity to complete the request. It may also be completed through enabled software.
We will engage with the project team to understand other nomination options if available and provide an update on the impacts in 2023.
It was noted the program roll-out is being accelerated due to recent hacking events. Essentially it aims to reduce the risk of an agent being changed or replaced without prior knowledge of the client.
New measures
2017 reform requiring non-government DGRs to be a registered charity
We encourage all DGRs to check they meet the DGR requirements that passed into law in 2021. The 12-month transition period is ending. Most non-government DGRs have until 14 December 2022 to be a registered charity with the ACNC or be operated by one. If a DGR has not started the process to register as a charity, the best thing to do is start the process now.
- Eligible DGRs that need more time to meet the requirements had until 13 December 2022 to apply for a 3-year extension – using the form on our website.
- If a DGR is not able to submit an extension application by the deadline due to exceptional circumstances, we encourage them to phone the NFP Advice Service on 1300 130 248 as soon as possible.
We have increased our communications over the last few months to encourage DGRs to take action before 14 December 2022 to ensure their endorsement remains active.
- We contacted close to 1,000 DGRs via phone, email or letter. Of those successfully contacted by phone, over 50% engaged in a discussion about the new requirements. Others have declined the call for a range of reasons such as, already being aware of the changes, having recently applied for charity registration, and going to apply for a 3-year extension.
- Early indications are that these communications have led to an increase in charity registration applications, ATO website visits and 3-year extension applications.
For those that do not meet the requirements where we do not hear from them, an automatic revocation of DGR status will commence after February 2023.
Enhancing transparency of income tax exemptions
From 1 July 2023, NFPs that self-assess income tax exemption and have an active ABN will be required to lodge an annual self-review form. The first lodgment will not be due until after 1 July 2024.
Up until this time we plan to hold consultative workshops with the sector, including Not-for-profit Stewardship Group members, to develop the self-review return form structure based on feedback received.
- We started working through this with stewardship group members in September and October and will continue to work through the finer details – such as what happens if a form is not lodged, and what happens with other obligations that may interlink with this form.
- We plan to continue this discussion at our March 2023 meeting, including working through the detail around how the lodgment framework will work in practice and client outcome pathways. This is the start of a collaborative approach that the ATO plans to continue over the course of 2023.
When presenting at community forums, we are starting to receive more questions on this policy change, and how it and other measures may impact the sector. It will be increasingly important to understand these changes by developing the complete roadmap for the sector.
Key messages that can assist the sector to prepare now are:
- Be sure to keep your ABN registration and contact details up to date on the Australian Business Register (ABR) which are required to be updated within 28 days of any changes.
- Use the worksheets available online and conduct a review to ascertain if you can self-assess your income tax exemption.
- Stay informed by subscribing to the ATO’s monthly NFP newsletter.
Strengthening the ABN system reform
Treasury recently opened public consultation on exposure draft legislation for Strengthening the ABN systemExternal Link. Initially announced by the former government in the 2019–20 Budget, the measure intends to make ongoing ABN registration contingent on meeting 2 obligations:
- comply with income tax lodgment requirements
- update the accuracy of details on the ABR annually.
It is early in the process of working through how it will apply. We are working closely with the project team to identify a streamlined design, if required, that would enable both obligations to be met via the self-assessing income tax review form.
Round table discussion
Governance
The latest Australian Institute of Company Directors NFP Governance and Performance Study shows the focus on governance is increasing time commitments required of directors due to the shear breadth of issues needing to be handled.
- Directors must balance dealing with compliance issues along with other focus areas, such as the Royal Commission into Aged Care. 2023 will be very busy, particularly with the increased review of compliance for this sector.
- A challenge will be how we ensure directors know about major changes that impact them and are kept engaged with all the issues. Increased workloads could be impacting lower-than-expected uptake of initiatives, perhaps highlighted by director ID.
Many sporting organisations are focusing on questions such as:
- Are they fulfilling their purpose?
- Does this flow through to their governance settings and arrangements?
The updated sporting ruling was well received. Many feel it provides clear guidance and this will filter down through governance arrangements.
Communicating with the sector
The ATO needs to increase issuing reminders for due dates and deadlines. With increased changes to personnel trending, it is possible deadlines will be missed – particularly for new measures governance and compliance requirements such as DGRs and self-assessment of income tax exemption.
Members noted the ATO’s focus on division 50 section 50-50 of Part 2-15 of the Income Tax Assessment Act 1997. It was interesting to see stronger compliance messaging around the requirement to operate for purpose and an emerging risk around commercial activities.
Better guidance on DGR categories for Public Benevolent Institutions and overseas aid funds would be appreciated. The ATO noted web content will be reviewed over the coming year with a focus on clearer guidance.
A key priority should be to identify how we bridge the divide for Indigenous NFPs, and marginalised and disadvantaged community groups, so they are comfortable in connecting with government agencies and departments.
The ATO is building a strong relationship with the Office of Registrar of Indigenous Corporations to work on bridging that gap. Some key questions for consideration included:
- How can we bring these groups together and drive whole-of government outcomes?
- How can we improve information flow? Messages issued through traditional channels, like that for director ID and Modernising Business Registers, are not filtering through to these communities.
- Is a more straight-forward and streamlined way to access services possible?
New measures, policy, and regulatory reform
Members would appreciate a response following Treasury’s public consultation on the Distribution guidelines for ancillary fundsExternal Link – which closed in May 2022.
Changes within the Australian Accounting Standards Board (AASB) Australian Financial Reporting Framework have not specified set limits. Rather, it appears regulators may set limits, but there is a lack of detail on how this will be achieved. There is a concern that this may result in lost opportunity, with investment made into big projects that cannot then be realised.
Interested members can contribute to AASB consultation sessions on the Development of Simplified Accounting Requirements. Consultation sessions run until the end of March 2023, with dates and timesExternal Link on the website.
There is a sense of consultation fatigue due to the scope of proposed sector changes and the number of measures being implemented.
The sector is expecting more consultation around the Strengthening for Purpose: Australian Charities and Not-for-profits Commission Legislative Review 2018, with further recommendations yet to be progressed. The sequencing of consultations over the next one to 2 years will be critical for managing timely outcomes while simultaneously enacting previously announced measures.
- There is sector interest in hearing more about intended changes for the ACNC – particularly around their remit around the broader NFP population.
- While it may be surprising, many directors and some banks still believe that the Australian Securities and Investments Commission (ASIC) remains the regulator for registered charities. There is some confusion around how to correctly advise a change of director, particularly if they are a company registered with ASIC. Banks are not accepting changes unless made through ASIC, despite the ACNC being able to issue a letter. The ATO and ACNC could work closely with ASIC and the banks to increase clarity and confidence.
Professional association members are looking forward to contributing to and progressing a regulatory harmonisation agenda in 2023.
Sector roadmap toward 2030
Members called for a focussed discussion on what the 2022 election commitment to Double Giving by 2030 might mean for the sector. For example:
- Could consideration be given to exploring a super bequest framework that would have significant benefit for the community, but a minimal revenue impact?
- What do we know about the NFP Productivity Commission review into Philanthropy and the NFP Sector Blueprint?
The ATO noted we may look at this more broadly in our second 2023 meeting. This would allow time to align to the Productivity Commission Terms of Reference and consideration of the international tax landscape.
- How can the DGR framework be simplified, particularly for overseas aid funds?
Emerging issues, risks, and trends
A high level of staff turnover is evident across many organisations. There is a need for more hands-on tax-basics training and webinars.
Increased efforts on addressing cyber-security and adding safeguards to prevent hacking events may overcomplicate the system and make it harder to navigate, for example, client agent linking. While it may be necessary, all attempts should be made to use natural systems already in use and reduce duplication and red-tape.
The ATO noted we are conscious not to contribute to the burden by over-governance in the NFP sector, which will be especially important in the Enhancing the transparency of income tax exemptions measure. We know NFPs want to do the right thing, although there are pockets of the sector that need further attention.
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 |
Jocelyn Condon |
Chartered Accountants Australia and New Zealand |
Susan Franks |
Clubs Australia |
Simon Sawday |
Giuntabell |
Nunzio Giunta (Co-chair) |
HWL Ebsworth |
Timothy Stokes |
Prolegis Lawyers |
Jae Yang |
The Salvation Army Australia |
John McIntosh |
The Tax Institute |
Bridgid Cowling |
Treasury |
Jacky Rowbotham |
Worlds Vision Australia |
Ben Scuteri |
Guest attendees
Organisation |
Attendee |
|---|---|
ATO |
Frances Gobel, Private Wealth |
ATO |
John Churchill, Office of the Chief Tax Counsel |
ATO |
Joy Tillman, Private Wealth |
ATO |
Marisa Hewitt, Private Wealth |
ATO |
Melinda Knight, Private Wealth |
ATO |
Richard Robinson, Private Wealth |
ATO |
Stephen Miller, Private Wealth |
Justice Connect |
Geraldine Menere |
Apologies
Organisation |
Members |
|---|---|
Australian Federation of Disability Organisations |
Ross Joyce |
Australian Institute of Company Directors |
Phil Butler |
Charities and Not-for-profits Committee, Law Council of Australia |
Seak-King Huang |
Community Council for Australia |
David Crosbie |
Joe Zabar Consulting |
Joe Zabar |
Philanthropy Australia |
Sam Rosevear |
The Dreaming Foundation |
Anthony Ward |