Despite the recent Christmas holiday period, the flurry of activity in the not-for- profit (NFP) sector has not stopped, and will not be stopping any time soon!
Here is a sector snapshot to help bring you and your organisation up to speed:
1. Australian Charities and Not-for-Profits Commission – up and running.
2. Regulatory Impact Assessment of Potential Duplication of Governance and Reporting Standards for Charities Report – looking at the options.
3. Unrelated Business Income Tax – on hold.
4. Tax Concession Working Group – consultation complete.
5. “In Australia” special conditions – still waiting.
The Australian Charities and Not-for-Profits Commission (ACNC) opened its doors on 3 December 2012, operating under the new ACNC Act 2012 (Cth) (ACNC Act). You
can obtain a copy of the ACNC Act on the ACNC website (www.acnc.gov.au).
The ACNC Act sets out the objects and functions of the ACNC, as well as the framework for the registration and regulation of charities. This includes the ongoing obligations that charities must comply with.
We highlight some important points for you:
You will have already heard that the ACNC only regulates charities, at this stage. Other organisations that are not- for-profits (NFPs) from a tax perspective, will come under the ACNC at a later stage (expected in 2014).
There are, however, different implications for existing charities, and organisations which want to become a charity. There are also different implications for existing charities, depending on their governing structure. There is more information about these issues below.
If your organisation was already a charity as at 3 December 2012 (that is, it was endorsed as a charity by the ATO to receive charity tax concessions), then your organisation will have automatically been registered with the ACNC. To date, there are 56,605 charities that are currently registered on the new register.
On 29 January 2013, the ACNC began sending letters and forms to all charities, asking charities to confirm their details. Some of you may have already received your letter. For those of you who have not, in the meantime you can search the ACNC register on the ACNC website to check if your charity has been transferred. The form you are asked to complete is also available on the ACNC website if you would like to have a look.
If you have not received a letter from the ACNC by the end of March 2013 and believe you should be registered, please contact the ACNC.
Please note that up to 2 June 2013, existing charities can choose not to be registered with the ACNC, however this will mean that they will not be able to access any charity tax concessions. You can indicate this on the form you receive from the ACNC.
If your organisation wishes to apply for any charity tax concessions, it will need to apply to the ACNC (previously, you had to apply to the Australian Taxation Office (ATO)).
First, the ACNC will decide if your organisation is a charity based on the information you are required to provide, set out in the “Step-by-step guide to registration” on the ACNC website. If the ACNC registers your organisation as a charity, this means that your charity can apply to the ATO for charity tax concessions.
The good news is, you can actually apply to register with the ACNC and apply for tax concessions with the ATO in the same registration form. The application is online, but you can request a paper form from the ACNC. After the ACNC decides your charity status, the ACNC will pass on your application for tax concessions to the ATO. The ATO will then decide which tax concessions could be available to your charity.
If your charity is seeking endorsement as a deductible gift recipient (DGR), it should look at page 9 of the “Step-by- step guide to registration” on the ACNC website which sets out the information the ACNC requires. You will see that you may also need to complete another form that is available on the ATO website.
There are fact sheets on the ACNC website to guide you and the ACNC’s processing time for new applications is, on average, 10 days. Please note that this does not include the processing time for the ATO to assess your tax concessions application.
If your charity is a public company limited by guarantee, some parts of the Corporations Act 2001 (Cth) no longer apply to your organisation, for example, if there are changes to your charity’s constitution, you now need to notify the ACNC, not ASIC, of this change. We have prepared a separate article in this newsletter about these changes.
If your organisation is, however, an incorporated association, you will still need to comply with the relevant State associations legislation, as well as the ACNC Act. This means that for the moment, your organisation will have duplicated requirements for governance and reporting.
The South Australian State Government has already announced that it will amend its State-based rules governing NFPs to harmonise with the ACNC, and other State Governments are working hard with the Federal Government to reach a coordinated approach.
The Council of Australian Governments has just released a report to give organisations an opportunity to provide feedback on proposed options that would address potential regulatory duplication. We look at this report in more detail below.
The ACNC will require charities to comply with governance standards from 1 July 2013 and the draft standards, set out in Regulations, have been released for consultation. Treasury will consider submissions over the coming weeks and both Houses of Parliament will need to approve the standards before they can be passed. We have prepared a separate article about the governance standards in this newsletter.
From 1 July 2013, charities will also be required to keep records so they can prepare for completing the 2013-14 annual information statement. Medium and large charities must prepare an annual financial report. Draft regulations outlining the proposed financial reporting requirements have also been released and we look at this further in a separate article in this newsletter.
The ACNC is also seeking submissions regarding its regulatory approach. The preliminary regulatory approach is set out in the ACNC’s regulatory approach statement (available on the ACNC website), which has been developed based on past public consultations. Submissions close on 1 March 2013.
The ACNC website has all you need to know about the ACNC, whether you are an existing charity or you are thinking about becoming a charity. You can also sign up on the website to receive regular updates from the ACNC.
Given that charities established as incorporated associations, cooperatives, and to a certain extent, charitable trusts, are now governed by both the ACNC and State/Territory regulators, in January 2013 the Council of Australian Governments (COAG) released a report about the issues that arise from such duplication, “Regulatory Impact Assessment of Potential Duplication of Governance and Reporting Standards for Charities”. The report is available on the COAG’s website (www.coag. gov.au).
The report looks at the extent of regulatory duplication for these entities, the problem being that the State/ Territory legislation sets out governance requirements and reporting requirements and these requirements differ from the proposals under the ACNC Act. It is likely that regulatory duplication would lead to duplication in time, effort and cost for these entities. The report sets out a list of consultation questions and COAG is seeking submissions on proposed options which are set out in the report. The outcomes from the consultation will feed into a final report in March 2013 containing a range of options for jurisdictions to consider ways to reduce regulatory duplication.
Even if you do not consider you will have time to review the report and provide submissions, we suggest that it would be valuable to review the report for a useful explanation of the sorts of issues that are being dealt with in relation to this duplication.
In 2011, the Federal Government announced the 2011- 12 Budget measure “Better Targeting of NFP Tax Concessions”, which is what essentially amounts to a new “unrelated business income tax” (known as UBIT) on the income of not-for-profit organisations.
It was due to commence on 10 May 2011 and then the Government postponed the commencement date to 1 July 2012 to allow for more consultation. No further update had been provided.
The Government, however, announced on 31 January 2013 that the UBIT will now commence from 1 July 2014 so that there can be further consultation and engagement with the NFP sector. We will provide further information about the consultation when it becomes available.
The Tax Concession Working Group (Working Group) was set up to review the range of tax concessions provided to the sector by the Government with a view to identifying reform options that could improve their effectiveness in supporting the work of the sector.
The Working Group released a consultation paper in November 2012 “Fairer, simpler and more effective tax concessions for the not-for-profit sector”, and organisations had the opportunity to provide submissions until 17 December 2012. The submissions will inform the final report, which the Working Group expects to provide to Government by March 2013.
The paper sets out the history and current status of tax concessions for NFPs and sets out questions for consultation regarding income tax exemption, DGR status, fringe benefits tax concessions, GST concessions and mutuality, clubs and societies. The paper also sets out options that would address the issues that the Working Group and sector have identified.
You can obtain a copy of the report on the Treasury website (www.treasury.gov.au).
Further to the Government’s announcement in the 2009/10 Budget that it would amend the “in Australia” special conditions, on 23 August 2012 the Government introduced the Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill 2012 (Tax Laws Amendment Bill) to Parliament.
The Tax Laws Amendment Bill was introduced into Parliament at the same time as the ACNC Bill, however, although the ACNC Act has come into force, the Tax Laws Amendment Bill is still before Parliament.
For more information, please contact: