House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello MP)

Chapter 4 - Deductible gift recipients

Outline of chapter

4.1 Schedule 4 to this bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to:

•

create a new general category of deductible gift recipient (DGR) for certain government special schools;

•

update the lists of specifically listed DGRs; and

•

extend the periods for which deductions are allowed for gifts to certain funds and organisations that have time limited DGR status.

Context of amendments

4.2 The income tax law allows taxpayers to claim income tax deductions for gifts of $2 or more to DGRs. To be a DGR, an organisation must fall within a category of organisations set out in Division 30 of the ITAA 1997, or be specifically listed under that Division.

4.3 The amendments in Schedule 4 will assist relevant funds and organisations to attract public support for their activities.

Summary of new law

4.4 These amendments create a new category of DGRs for certain government special schools that provide education solely to students with a disability. This gives effect to the Treasurer's announcement in Press Release No. 32 of 11 May 2004.

4.5 These amendments also add certain fire and emergency services authorities as specifically listed DGRs. The Government announced in the Treasurer's Press Release No. 114 of 23 December 2003 that it would legislate to ensure that the Country Fire Authority, the Victoria State Emergency Service and equivalent coordinating bodies in other states and territories could benefit from being able to receive tax deductible gifts.

4.6 The remaining amendments add certain other organisations as specifically listed DGRs and extend the period for which deductions are allowed for gifts to certain funds and organisations that have time limited DGR status.

Detailed explanation of new law

New deductible gift recipient category for special schools

4.7 The amendments will extend DGR status to all government schools that:

•

provide special education for students with a disability that is permanent or is likely to be permanent; and

•

do not provide education for students without a disability.

[Schedule 4, item 1]

4.8 Some special schools had previously been granted DGR status after being endorsed by the Commissioner of Taxation (Commissioner) as public benevolent institutions (PBIs). The Commissioner has now determined that these organisations are government bodies and so cannot be PBIs. It is a well established principle of common law that a government body is not a PBI. The amendments will ensure that special schools that previously had PBI status can continue to receive tax deductible gifts.

4.9 The amendments do not extend DGR status to those mainstream schools that also provide some education to students with disabilities. Non-government special schools operating on a non-profit basis will continue to be able to seek DGR endorsement as a PBI.

4.10 Under the new law, a government special school may apply to the Commissioner to be endorsed as a DGR under the new general category. An organisation may only be endorsed after it has satisfied the Commissioner that it meets certain integrity standards, known as the gift fund requirements, which are set out in the Australian Taxation Office (ATO) Public Ruling TR 2000/12: Income tax: deductible gift recipients - the gift fund requirements and the ATO's Fact Sheet: Gift fund requirements.

Deductible gift recipient listing for state and territory fire and emergency services

4.11 Schedule 4 also lists as DGRs the state and territory coordinating bodies for fire and emergency services listed in Table 4.1. [Schedule 4, item 13]

4.12 Some of these organisations had previously been granted DGR status after being endorsed by the Commissioner as a PBI. The Commissioner has now determined that these organisations are government bodies and so cannot be PBIs. The amendments will ensure that these coordinating bodies can continue to receive tax deductible gifts.

4.13 On 1 July 2004, the Emergencies Act 2004 came into effect establishing the ACT Rural Fire Service and the ACT State Emergency Service to replace the Rural Firefighting Service and the ACT Emergency Service respectively. As a result, four fire and emergency service bodies are listed for the Australian Capital Territory.

4.14 Generally, an organisation is specifically listed only after it has satisfied the Commissioner that it meets integrity standards, known as the public fund requirements. The coordinating bodies that have met the public fund requirements are being specifically listed in this bill. Further, any coordinating bodies which meet the public fund requirements at a later date will be legislated at that time.

Other specifically listed deductible gift recipients

4.15 Schedule 4 lists as DGRs the organisations in Table 4.2. [Schedule 4, items 3, 4, 10 to 13 and 16]

4.16 The CFA and Brigades Donations Fund was established by the Country Fire Authority of Victoria to raise and collect donations from the public specifically for distribution to the Country Fire Authority volunteer fire brigades in Victoria. [Schedule 4, item 13]

4.17 The Australian Branch of International Social Service is a non-government, not-for-profit organisation offering professional social work services to people in Australia and overseas. The organisation offers assistance to those with social or socio-legal problems arising from migration. [Schedule 4, item 4]

4.18 The Victorian Crime Stoppers Program encourages community involvement in the apprehension and conviction of criminals, and the reduction in crime by the provision of information to the proper authorities. [Schedule 4, item 4]

4.19 The Coolgardie Honour Roll Committee was established to erect the Honour Roll Memorial to remember the men and women of Coolgardie who fought for Australia in all wars. [Schedule 4, item 10]

4.20 The Tamworth Waler Memorial Fund was established to erect the Waler War Memorial to recognise the important contribution of the stock horse to Australia's military commitment in the Boer War and the Great War, along with the men who rode them. [Schedule 4, item 10]

4.21 Australian Business Week Limited has the principal objective of educating Australian students to foster interest in entrepreneurial and enterprise development. [Schedule 4, item 11]

4.22 The City of Onkaparinga Memorial Gardens Association Inc. was established to develop memorial gardens and grounds in Morphett Vale, South Australia, to serve as a war memorial to honour and commemorate the sacrifices made by Australians who served in all wars from the Great War of 1914-1918 to the Gulf War and those serving in peacekeeping forces. [Schedule 4, item 10]

4.23 The Finding Sydney Foundation has as its principal objective the search for the HMAS Sydney II and the German auxiliary cruiser HSK Kormoran, that disappeared off the Western Australian coast on 19 November 1941, and establish a virtual memorial to the sailors and the engagement. The loss of the Sydney with its crew of 645 remains one of Australia's greatest wartime mysteries. [Schedule 4, item 10]

4.24 The Clontarf Foundation seeks to improve the health, employment, education and life skills of disadvantaged youths (predominantly indigenous boys) through a number of Australian Rules football academies in Western Australia. The Foundation now seeks to expand its operations into the Kimberley region, the Northern Territory and Queensland. [Schedule 4, item 3]

4.25 Lord Somers Camp and Powerhouse runs programs providing opportunities for youths to develop leadership and personal skills. Various programs are run throughout the year, such as programs aimed at 16 to 18 year olds to develop teamwork, self-confidence, tolerance and leadership skills, and programs for youths with chronic illness or physical disabilities to promote their self-esteem and confidence. [Schedule 4, item 16]

4.26 The Lowy Institute for International Policy was previously known as the Institute for International Policy. The institute was established to provide independent and policy oriented research on international issues and, through its work, inform public debate on economic and foreign policy issues, international affairs and matters of national importance. [Schedule 4, item 12]

4.27 St George's Cathedral Restoration Fund assists St George's Anglican Cathedral in Perth to raise money for restoration and refurbishment of the Cathedral building, Burt Memorial Hall and the Deanery. [Schedule 4, item 16]

Extending periods for which gifts are deductible

4.28 Schedule 4 extends the period for which deductions are allowed for gifts to certain organisations as outlined in Table 4.3. The extensions will support the further work of the relevant organisations. [Schedule 4, items 5 to 9, 14 and 15]

4.29 The Australian Ex-Prisoners of War Memorial was built to pay tribute to the sacrifice and service since Federation, of approximately 35,000 Australian prisoners of war and serve as a place of remembrance for the families and friends of Australians who have died in captivity. [Schedule 4, item 6]

4.30 The Albert Coates Memorial Trust raises funds to establish 'living memorials' to honour Sir Albert Coates who served with distinction in the two World Wars. Among other activities, the Trust provides scholarships each year to medical graduates and to students in the Ballarat community. [Schedule 4, item 7]

4.31 The St Patrick's Cathedral Parramatta Rebuilding Fund assists the Parramatta community to rebuild St Patrick's Cathedral which was destroyed by fire on 19 February 1996. [Schedule 4, item 14]

4.32 The St Paul's Cathedral Restoration Fund assists St Paul's Anglican Cathedral in Melbourne to raise money for restoration and refurbishment of the Cathedral building. [Schedule 4, item 15]

4.33 The Mount Macedon Memorial Cross Trust was established to undertake development and restoration of the Mount Macedon Memorial Cross and the surrounding land. The Cross, which was built in honour of those killed in World War I, is recognised as one of the most significant war memorials in Victoria. [Schedule 4, item 8]

4.34 The Shrine of Remembrance in Melbourne built during the depression, is a memorial of national significance and commemorates the sacrifices made by Victorians during World War I, World War II and the conflicts in Korea, Malaya, Borneo, Vietnam and the Persian Gulf. [Schedule 4, items 5 and 9]

Application and transitional provisions

4.35 The amendments creating a new category of DGRs for certain government special schools apply from 1 April 2004. [Schedule 4, item 2]

4.36 The amendments specifically listing state and territory fire and emergency services in Table 4.1 apply from 23 December 2003, with the exception of the ACT Rural Fire Service and the ACT State Emergency Service which apply from 1 July 2004, reflecting that these organisations only began operating under these names from that date. [Schedule 4, item 13]

4.37 The amendments specifically listing the organisations in Table 4.2 apply from the dates of effect shown in that table. [Schedule 4, items 3, 4, 10 to 12 and 16]

4.38 The amendments to extend the listings for the organisations in Table 4.3 apply for the periods shown in that table. [Schedule 4, items 5 to 9, 14 and 15]