In the Federal Budget delivered on 10 May 2011, several
announcements were made that will affect the charity and
not-for-profit sector. These include:
tighter controls on tax concessions for charities operating
business activities unrelated to their charitable activities
establishment ofa 'one-stop-shop' for the support and
regulation of the sector in the form of the Australian Charities
and Not-for-Profits Commission by 1 July 2012
introduction of a statutory definition of 'charity' for
all federal laws
a new regulatory framework for public ancillary funds
An overview of each of the inclusions is provided below.
Tighter controls on tax concessions
Possibly the most important Budget announcement for
Not-for-Profits relates to reforms to tax concessions to ensure
that income tax concessions will only apply to profits generated by
commercial activities that are directed back to the not-for-profit
entity's charitable works.
This will have an impact on not-for-profit entities who
undertake commercial activities, although transitional arrangements
are likely. The Budget has indicated that commercial activities
that further the entity's altruistic purposes, and small-scale
and low-risk unrelated commerical activities will not be
Defining these concepts and limiting their impact will be a
difficult legislative task in light of the subjective nature of the
Gadens Lawyers will be closely monitoring these reforms to
determine the precise mechanisms of reform that are proposed.
Australian Charities and Not-for-Profits Commission
The announcement of theestablishment of the Australian Charities
and Not-for-Profits Commission (ACNC)follows the
release of the scoping study for a national not-for-profit
regulator in January 2011. That study involved submissions in
relation to the proposed regulator's scope and functions,
independence, services to be provided, as well as a statutory
definition of 'charity'(see our update here).According
to the Treasury, 162 formal submissions were made to the scoping
The 2011 Budget announced the following proposals for the
ACNC will have sole responsibility for determining charitable,
public benevolent institution and other not-for-profit status
From 1 July 2011, The ATO will structurally separate its role
of determining charitable status from its role of administering tax
The ATO retains responsibility for administering tax
concessions for the not-for-profit sector
The ATO will provide corporate service support to the ACNC in
the form of IT services, human services, financial services and
The ACNC will implement a 'report-once use-often'
general reporting framework for charities
The ACNC will implement a public information portal by 1 July
The ACNC will initially be responsible for providing education
and support to the sector
The Budget also announced that the Government proposed to
negotiate with the States and Territories on national regulation
with the aim of minimising reporting and other regulatory
requirements through coordinated national arrangements. This may
lead to reforms or repeal of existing charitable collection or
fundraising legislation at state level.
Over time, we would expect to see increased national
consistency, particularly in relation to the regulation of
Statutory definition of 'charity'
The Budget makes provision for the introduction of a statutory
definition of 'charity' to take effect from 1 July 2013
consultation with states and territories with the intention of
uniform adoption across all jurisdictions
for the ACNC to develop guidance for the sector, implement
system changes and re-assess the charitable status of entities on
the basis of the new statutory definition.
New regulatory framework for public ancillary funds
The Government will introduce a new regulatory framework similar
to the 2009 changes to private ancillary funds.
Following the Discussion Paper released in November 2010 (see
our update here), the proposed
framework has been alluded to previously and includes:
legislative guidelines governing the establishment and
maintenance of the funds
ATO power to impose administrative penalties on trustees for
breaches of the guidelines
transitional provisions to faciliate transition.
There is no doubt the reforms will force not-for-profit
organisations to review and consider their current activities and
future plans. Gadens Lawyers is able to advise and
assist organisations in navigating this changing landscape.
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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