Discussion Paper Released on Tax Concessions for Not-for-Profits

Discussion Paper Released on Tax Concessions for Not-for-Profits

Recently, the not-for-profit sector Tax Concession Working Group (“Working Group”) released a discussion paper, “Fairer, simpler and more effective concessions for the not-for-profit sector” to stimulate debate and feedback on the federal tax concessions available to not-for-profit (“NFP”) entities.

The Assistant Treasurer David Bradbury said “the Working Group was established in February 2012 to examine the current range of tax concessions and whether there are fairer, simpler and more effective ways of delivering the current envelope of support.”  The Working Group has been asked to identify offsetting savings from benefits provided to the NFP sector for any proposals they recommend that have a budget cost. In other words, any recommendations must be revenue neutral overall.

Discussion paper

The discussion paper is not intended as a position paper and the options canvassed are not recommendations to government. The discussion paper is simply to ignite debate and seeks public input on how tax concessions can be improved to assist the NFP sector to do what they do best – support Australian communities.

The discussion paper seeks feedback on 57 specific questions about existing tax concessions on issues such as:

  • Income tax exemption and refundable franking credits
  • Deductible gift recipients
  • FBT concessions
  • GST concessions
  • Mutuality, clubs and societies.

The questions are broad and require careful consideration as any review raises the potential for a reduction of benefits.

The discussion paper poses some interesting questions and issues, such as:

Should all charities be Deductible Gift Recipients (“DGRs”)?

A possible reform option is to expand DGR status to all endorsed charities, as recommended in the Productivity Commissions report, “Contribution of the Not-for-Profit Sector”. It is thought that this reform option could improve the fairness of Australia’s DGR framework and encourage charitable giving as it would expand the scope of DGR entities.

Should the threshold for deductible gifts be increased from $2 to $25?

The main purpose of any change would be to simplify administration for DGRs and for donors and potentially encourage donors to consider making larger individual donations.

Would a clearinghouse linked to the ACN Register be beneficial for the sector and the public?

With the Australian Charities and Not-for-Profits Commission supposedly commencing early December 2012, a clearinghouse for gifts to DGR entities which is linked to ACN register could promote and encourage charitable giving. It is thought that individual taxpayers could use the register to search for particular DGRs to support.

Next steps

Interested parties are encouraged to respond to the 57 questions raised in the discussion paper. Written submissions are due by 10am on Monday 17 December 2012.

The Working Group is to deliver the final report to Government by March 2013.