House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer,the Hon. J. Kerin, M.P.)

Chapter 7 Gifts to Gift Funds of Cultural Organisations

[Clause: 37, 38]

Overview

Introduces new arrangements for gifts to gift funds of cultural organisations.

As a consequence, removes seven cultural organisations which are presently listed in the income tax gift provisions.

Summary of the proposed amendments

7.1. This Bill will amend the income tax gift provisions by allowing deductions for gifts made directly to a gift fund of a cultural organisation admitted to the Register of Cultural Organisations.

7.2. As a consequence, the Bill will remove the names of seven cultural organisations that are presently listed in the gift provisions.

7.3. The amendment will allow gift funds of cultural organisations to receive tax deductible donations by entry on the Register. To be listed on the Register, a fund must be approved by the Treasurer and the Minister responsible for the Arts (the Arts Minister).

7.4. The amendment will take effect from 25 March 1991. This is the date from which the first seventeen organisations, which were announced in the Press Release of 24 March 1991, became eligible to be included on the Register and therefore receive tax deductible donations.

Background to the legislation

7.5. There are seven cultural organisations listed in the existing gift provisions (section 78) that are allowed to receive tax deductible donations. These organisations are:

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the Australian Elizabethan Theatre Trust;

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the Sydney Opera House Appeal Fund;

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the Sidney Myer Music Bowl Trust;

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the Art Gallery Society of New South Wales;

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the Victorian Arts Centre Trust;

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the Queensland Cultural Centre Trust; and

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the Australian National Gallery Foundation.

7.6. Other cultural organisations have had access to tax deductible donations indirectly through the Australian Elizabethan Theatre Trust. The Trust itself is a listed organisation under subparagraph 78(1)(a)(xiii).

7.7. Under the proposal a gift fund administered by a cultural organisation that has been approved by the Treasurer and the Arts Minister will be listed on a register known as the Register of Cultural Organisations. Donations of $2 or more of money or of certain property to a fund listed on the Register will be tax deductible. [Subclause 37(b) - new subparagraph 78(1)(a)(cvii)] To be included on the Register, an organisation and its fund need to satisfy certain eligibility criteria. [Clause 38 - new section 78AA]

7.8. The Register is to be administered by the Department of the Arts, Sport, the Environment, Tourism and Territories (DASETT). [Clause 38 - new subsection 78AA(2)]

Explanation of the proposed amendments

What is the effect of the amendments?

7.9. Section 78 of the income tax law operates to allow tax deductible gifts to cultural organisations that are presently listed in the gift provisions. Under the proposal, the names of these organisations will be removed from the legislation and included on the Register of Cultural Organisations.

7.10. Donations to gift funds administered by cultural organisations which are listed on the Register of Cultural Organisations will be tax deductible [Subclause 37(b) - new subparagraph 78(1)(a)(cvii)] . Donors will be able to make donations to gift funds directly and it will no longer be necessary for such funds to seek assistance through the Australian Elizabethan Theatre Trust.

What is a gift fund?

7.11. A gift fund is a public fund to which donations of money or property are made. Money from interest on donations, income derived from the property and money from realisation of the property are to be deposited into the fund. The fund needs to be kept separate from other funds. [Paragraph (c) of the definition of 'cultural organisation' in subsection 78AA(1)]

How does a gift fund become eligible to receive tax deductible donations?

7.12. To satisfy the eligibility criteria a gift fund needs to:

(a)

be established and maintained exclusively for cultural purposes. 'Cultural purposes' is defined in new subsection 78AA(1);

(b)

be administered by an organisation that has been certified by the Arts Minister to be a cultural organisation. [Clause 38 - new subsection 78AA(3)] 'Cultural organisation' is defined in new subsection 78AA(1);

(c)

be included by DASETT on the Register of Cultural Organisations on the direction of the Treasurer and the Arts Minister. [Clause 38 - new subsection 78AA(4)] Gifts to the fund will be deductible from the date specified in the direction. A fund cannot be included on the Register retrospectively.

7.13. In exercising their discretion whether to give a direction to DASETT, the Treasurer and the Arts Minister need to take into account the policies and budgetary priorities of the Australian Government. [Clause 38 - new subsection 78AA(5)]

Can a gift fund be removed from the Register?

7.14. A gift fund may be removed from the Register on the direction of the Treasurer and the Arts Minister. [Clause 38 - new subsection 78AA(8)] Gifts made to that fund would cease to be deductible from the date specified in the direction. A fund cannot be removed retrospectively.

Transitional arrangements

7.15. Transitional provisions [Clause 38 - new subsections 78AA(6) and (7)] are included for cultural organisations and their gift funds which were approved for admission to the Register of Cultural Organisations between 24 March 1991 and the date this Bill receives Royal Assent.

7.16. These provisions take into account that four Press Releases have been issued either by the Arts Minister or DASETT or the Treasurer and the Arts Minister. These Press Releases announced that 172 organisations and their gift funds qualify for admission to the Register. On 24 March 1991, 17 organisations were announced to be eligible to be admitted to the Register of Cultural Organisations. They were followed by:

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42 organisations and their funds on 14 May 1991;

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56 organisations and their funds on 26 June 1991; and

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57 organisations and their funds on 5 September 1991.

For the purposes of deduction, gifts to a nominated organisation and its fund will be deductible from either 25 March 1991 or the date of the Press Release which announced that organisation's and fund's eligibility for admission to the Register [Clause 38 - new subsection 78AA(6)] . The amendment gives effect to whatever date each of the relevant Press Releases indicated was the date from which donations to the specified organisations and funds were tax deductible. [Clause 38 - new paragraph 78AA(6)(e)]

7.17. This also applies to the seventeen organisations which were announced on 24 March 1991 even though some of them, at that time, may not have been cultural organisations (as now defined in subsection 78AA(1)) provided they satisfy the definition by the time this Bill commences. [Clause 38 - new paragraph 78AA(6)(b)]

7.18. However, if at the time this Bill commences an organisation is not a cultural organisation as defined, then gifts to that organisation will be deductible from 25 March 1991 to the date of Royal Assent. [Clause 38 - new subsection 78AA(7)] The organisation will then be removed from the Register on the date of Royal Assent. [Clause 38 - new Paragraph 78AA(7)(e)]

Commencement date

7.19. The amendments to remove the seven organisations presently listed in paragraph 78(1)(a) apply from the date that this Bill receives Royal Assent.

7.20. The amendments to include the Register of Cultural Organisations apply to gifts made after 24 March 1991.

Clauses involved in the proposed amendments

Subclause 37(a) : Repeals subparagraphs 78(1)(a)(xiii), (xxviii), (xxix), (xxxiv), (lxiv), (lxix) and (xcii).

Subclause 37(b) : inserts new subparagraphs 78(1)(a)(cvii) which will allow deductions for gifts made to gift funds which are listed on the Register of Cultural Organisations.

Clause 38: Inserts section 78AA which sets out transitional arrangements and the eligibility criteria for gift funds.