Not-for-profit Stewardship group key messages 9 March 2023

Key messages from the Not-for-profit Stewardship group meeting 9 March 2023

Treasury

Transfer of DGR registers reform

Measure was announced as part of the 2017 Deductible gift recipient (DGR) reforms, that will see the administration of four DGR Registers to the ATO.

Treasury opened public consultation on the DGR Registers reform between 19 January and 19 February 2023. Around 40 submissions were received. This informed changes made to draft enabling legislation, including:

2 changes to the Overseas aid gift deduction scheme – a DGR will be eligible as a fund not just as an institution. Intuitions will also be able to partner with other entities including individuals.
The ‘In Australia’ condition was removed from the Harm Prevention category.

It is expected that the Bill will be tabled during the Autumn 2023 sitting, with a possible effective start date of early 2023.

ACNC secrecy provisions

The 2018 Australian Charities and Not-for-profit Commission (ACNC) Review recommended discretion to disclose information about regulatory activities. The Charities Minister is considering the reform in regard to disclosure around registrations and investigation outcomes.

Exposure legislation and an explanatory memorandum are being drafted with potential to be opened up to public consultations in April 2022.

Removal of cheques

There was recent consultation held on the Strategic Plan for the Payments System, which also discussed the potential for the removal of cheques. It is flagged for discussion at the ACNC Sector Forum in March 2023. There is also potential for a standalone consultation to be opened to consider consequences for this reform.

New Zealand has already implemented a removal, given the service-cost of cheques.

The ATO can still issue refunds by cheque.

Member comments

Is there any update on the progression of Ancillary Fund proposals? They don’t appear to have progressed since the 2022 consultation.

Treasury advised the new government has focussed on other priorities. The sector may seek change through advocacy.
Has there been any development in Beneficial Ownership?

Another Treasury unit is handling this matter. My Not-for-profits and Tax Administration Branch will advocate to engage the sector on any impacts.
Member: Consultation paper released on Australian Accounting Standard Boards (AASB) Tier 3 Reporting. It appears regulators will set the operation of that standard. Will AASB rectify this? The impact may be the standard will not progress as intended.

ACNC Advised that they are also drafting a submission.
Member: Has there been a level of agreement on fundraising principles? Interested in knowing more about how the departure from harmonisation principles would look.

Treasury advised a working group that involves states and territories are looking into this.
Member: The Charities Minister has been meeting with charities. Is there any update on the Productivity Commission’s Philanthropy Review?

Treasury advised the Productivity Commission’s draft report is expected around November 2023, with the final report due around May 2024.

ACNC

Since being appointed, a key focus of the new ACNC Commissioner has been on connecting with charities.

The ACNC welcomed the Government’s announcement on nationally consistent fundraising principles.

After consultation with the sector, the ACNC has released guidance for charities around crypto-assetsExternal Link. It includes information on what charities should consider before accepting donations of crypto-assets or investing in these assets. They need to consider the risks involved and if the investment is right for them.

The ACNC published guidance on their website to provide clarification on charity activities in the lead-up to the planned referendum on an Indigenous Voice to Parliament. Charities who want to contribute to these conversations can get more information at Charities, advocacy and the planned referendum on an indigenous voice to parliament. Essentially, if a charity wants to provide a statement of support, this will not jeopardise charity registration. Charities should ensure they can demonstrate why they consider the advocacy further their charitable purpose.

Related Party TransactionExternal Link Reporting is due to start in the 2023 Annual Information Statement (AIS). Charities need to ensure they are aware of what related party transactions are, know how to identify them and record them.

The ACNC consulted with the sector on the form of the question in the AIS and is looking to balance the need to gather enough information to support effective regulation with minimising the compliance burden.

Work is progressing on the Public Benevolent Institution (PBI) and Health Promotion Charity (HPC) Commissioner’s Interpretation Statements. While there is no firm timeframe for finalisation, the ACNC is seeking to make the statements as robust and helpful as possible, by providing detailed information for those who need it.

NFP Centre

The Buddhist Society of Western Australia Inc v Commissioner of Taxation (No 2) [2021] FCA 1363 (4 November 2021)

The Federal Court found the ATO’s interpretation of schools was too narrow. Key points of note were that:

while regular, ongoing and systematic instruction may be provided, the presence of these factors is not essential to satisfy the ordinary meaning of school, and
the ordinary meaning of school does not require a course education to be vocational as opposed to recreational.

The Decision Impact Statement acknowledges the Federal Court decision.

ATO assessment of school building fund DGR applications will also reflect these findings.

Tax Ruling 2013/2 and web-guidance will be reviewed and updated to reflect the decision. A timeline is yet to be confirmed but is likely to be toward the end of 2023.

We will seek small working groups to test language and examples, which has previously worked effectively and been well received by the community.

GST Ruling 2012/2 Goods and services tax: financial assistance payments

Examples have been developed to support the ruling. These have been progressed through to our corporate writing services for review.

We expect to share the updated content with members before publishing.

Deductible gift recipients (DGR) reforms

DGRs required to be registered charity

Most non-government deductible gift recipients (DGRs) needed to register as a charity by 14 December 2022 to continue to be eligible for DGR endorsement.

We've recently reviewed non-government DGRs against the requirements to be a registered charity or operated by one, and have commenced revoking DGR endorsement of those that are no longer eligible.

DGRs that don't meet the eligibility requirements or haven't been approved by the ATO for a 3-year extension are no longer entitled to DGR endorsement and will have their status revoked. These DGRs will receive a notice with the date, reason for revocation and rights for the decision to be reviewed. A DGR that has their status revoked will be able to re-apply for endorsement if they later satisfy DGR requirements.

Transfer of DGR Registers

Treasury opened public consultation on the Deductible Gift Recipient (DGR) Registers reform between 19 January and 19 February 2023.

Enabling legislation has not yet been passed by Parliament. If it is enacted into law, the ATO will gain responsibility for assessing eligibility for four unique DGR categories currently administered by portfolio agencies. The ATO already administers 48 of 52 DGR categories set out in Division 30 of the Income Tax Assessment Act 1997.

The intention of this change is to make all DGR categories consistent in administration, reduce red tape and simplify the application process for seeking DGR status.

Progress of the enabling legislation can be tracked at Parliament of AustraliaExternal Link

Enhancing the transparency of income tax exemptions

From 1 July 2023, 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 self-review return will guide a not-for-profit to review their organisation’s tax status and confirm eligibility to income tax exemption. The first return will not be due until after 1 July 2024 for the 2023–24 income year.

We will continue to work with the sector, including the Not-for-profit (NFP) Stewardship Group members, to co-design the form structure and reporting framework. While we do this over the coming year, there are four things that NFPs can do now to prepare for lodgment in 2024:

Update your NFPs contact details and notify us of changes to your organisation. It’s an ABN registration requirement to keep your contact details current and it also means you’ll receive important information about your tax and super obligations.
Complete our worksheets to review your eligibility for an income tax exemption.
Find out more about income tax exempt and taxable not-for profits at Does my not-for-profit need to pay income tax?
Stay informed by subscribing to the monthly newsletter at ato.gov.au/nfpnews

Collaborative Session – Transparency of income tax exemption project

The annual self-review return is currently under development and will comprise questions that guide not-for-profits to review their purpose and activities against specific eligibility requirements of an income tax exempt entity.

Members workshopped key impacts and design considerations for four client outcome pathways that will result from the lodgment of the self-review return.

Feedback and insights collated from this session will inform the development of the annual self-review return and the new reporting framework. Consultation will continue over the forward months with NFP Stewardship Group members and sector stakeholders.

Attendees

Attendees list
Organisation	Member
ATO	Louise Clarke (Co-chair), Private Wealth
ATO	Jennifer Moltisanti, Private Wealth
ATO	Prescilla Moses (Secretariat), 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
Clubs Australia	Olivia Simpson
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

Guest list
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

Apologies list
Organisation	Member
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