Over the last six months a number of proposals have been considered by the Australian Government, and a number of announcements have been made in relation to their policy directions.
There is no proposed legislation at this stage, but here is a summary of the proposals as they have been announced to date.
Tax deductible gift recipient reform opportunities
The Commonwealth Treasury released a discussion paper (Discussion Paper) on the proposed reforms to the deductible gift recipient (DGR) status system, the consultation process was completed on 4 August 2017. The Discussion Paper outlined a number of proposals to strengthen governance arrangements, reduce administrative complexity and ensure an organisation’s DGR status is up-to-date.
The Discussion Paper recommended the following reforms:
requiring all DGRs to be charities registered with the Australian Charities and Not-For-Profits Commission (ACNC);
- providing the ACNC and the Australian Tax Office (ATO) with authority to revoke an organisation’s status, if one of the grounds for revocation under the ACNC Act were to exist;
- simplifying the application process by transferring the four DGR registers to the ATO;
- removing the public fund requirement for DGRs that are charities,
- allowing DGR entities to apply to be endorsed across multiple categories;
- introducing regular reviews undertaken by the ACNC and/or ATO to ensure an organisation’s DGR status was up to date; and
- introducing annual certification ensuring that an organisation meets DGR eligibility criteria.
Reforming administration of tax deductible gift recipients
In a Media Release on 5 December 2017, the Minister for Revenue and Financial Services announced the Government’s plan to reform the administration and oversight of organisation with DGR status.
The proposed reforms include:
providing for the integration of the DGR registers and Overseas Aid Gift Deduction Scheme with the ACNC charity register, and abolishing duplicative reporting requirements;
- providing additional funding to the ACNC and ATO to review a larger number of DGRs for ongoing eligibility, where risks are identified;
- for the ACNC to provide a central location for applications and reporting, it will also work with the ATO to provide a streamlined experience;
- issuing External Conduct Standards to be endorsed by the ACNC as recommended by the ACNC and the AUSTRAC's report of 28 August 2017: Australia's non-profit organisation sector: money laundering and terrorism financing risk assessment report;
- the Government will not proceed with the unlegislated 2009-10 Budget measurePhilanthropy – reforming the 'in Australia' requirements that apply to tax exempt entities. The unlegislated measure could prevent many DGRs from conducting legitimate activities outside Australia, such as visits to foreign medical institutions or participating in international cultural or sporting events, and would not provide appropriate oversight of the overseas activities of exempted organisations such as overseas disaster relief funds;
- the Government will not mandate a level of remediation by environmental organisations, however, the existing reporting requirements of DGRs currently on the four registers, including environmental reporting requirements, will be collected by the ACNC in the Annual Information Statement;
- for the ACNC to publish charities' declarations of political expenditure to the Australian Electoral Commission and relevant criminal activities of charities' staff or responsible persons in the Annual Information Statement; and
- amending the Register of Cultural Organisations' eligibility criteria to enable organisations that promote Indigenous languages to be endorsed as DGRs.
Russell Kennedy Lawyers will continue to keep the sector informed of further developments, particularly if any legislation is finally proposed. Of course, any legislation proposed will need to be cleared by the Senate, therefore it is not certain at this stage if any particular reforms will be implemented.
For more information, please contact Michael Gorton AM, Principal on (03) 9609 1505.
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