The latest on the “in Australia” special conditions

August, 2012

Where is it at?

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.

As with the ACNC Bill, the Tax Laws Amendment Bill was introduced into the House of Representatives on 23 August 2012 and it has now been considered by the Parliamentary Joint Committee on Corporations and Financial Services and the Senate Standing Committee on Community Affairs. Both Committees have also recommended that the Bill be passed.

This legislation will also be debated, and then it is expected that the Tax Laws Amendment Bill will be passed through both Houses of Parliament with the ACNC legislation.

What does this all mean?

The legislation re-states and standardises the “in Australia” special conditions for tax concession entities and makes it clear that both income tax exempt entities and DGRs are subject to the conditions.

Although there are some exemptions (such as Government entities), for income tax exempt entities, the Tax Laws Amendment Bill provides that the entity:

1. must generally be operated principally in Australia; and

2. pursue those purposes principally in Australia (principally meaning mainly or chiefly; and more than 50%).

For DGRs, the test is tougher, the Bill providing that the entity:

1. must generally be operated solely in Australia; and

2. pursue their purposes solely in Australia community.

Again though, there are some exceptions for DGRs, such as overseas aid funds, developed country relief funds, existing medical research institutes and registered environmental organisations.

Would your organisation satisfy the special conditions?

There are a number of factors that the Tax Commissioner will look at when determining whether an organisation satisfies the special conditions. It could be useful for your organisation to do an analysis by looking at the following questions:

• Where does your organisation earn its income?

• Where does your organisation incur its expenditure? (excluding money spent overseas which is received by way of a government grant or a non tax deductible gift)

• Does your organisation give money or property to another company? If yes, is the receiving company an Australian not-for-profit?

• Where does your organisation undertake its activities?

• Where is the organisation’s property located?

• Where is your organisation managed from?

• Where is your company resident or located?

• Where are your organisation’s employees located? If some are located overseas, what percentage of your workforce is located overseas?

• Who is directly and indirectly benefiting from your organisation’s activities?

• Where are these beneficiaries located?

Based on this analysis, if you think your organisation would satisfy the conditions, you do not need to do anything. But if not, you may wish to start looking at your organisation’s activities and structure.

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