On 17 April 2012, the Assistant Treasurer released a revised
exposure draft on the special conditions applicable to tax
concession entities including the 'in Australia'
requirement and the definition of 'not-for-profit'. The
changes affect the requirements and criteria to be met to qualify
for income tax exemptions in Australia by charities and
not-for-profits which have any overseas activities.
The revisions are the result of consultations on the initial
exposure draft released in July 2011 (see our update here).
The draft legislation is expected to be introduced into
Parliament in mid-2012.
Submissions on the revised exposure draft are due 11 May
The revised exposure draft, together with a fact sheet and
explanatory material can be accessed here.
Will the changes affect my charity/not-for-profit?
The changes mainly affect the following:
Charities and not-for-profits which may have some or all of
their activities overseas but are not endorsed as overseas aid
funds or disaster relief funds
Charities and not-for-profits that make donations overseas or
in support of overseas activities
Organisations falling within those two categories should:
review their activities in light of the changes to ensure that
the impact of the draft legislation does not place their
eligibility for deductible gift recipient (DGR) status or income
tax exemptions at risk
consider making a submission on the revised draft legislation
to address the operation impact and the policy basis for the
What are the changes?
The previous draft legislation contained a number of problematic
provisions with serious consequences for charities and
not-for-profits either conducting overseas activities or providing
funds to other organisations with overseas activities. Other
problematic provisions included a provision that put an
organisation's endorsement for income tax exemption at risk
for failing to comply with its constitution or other governing
rules; and a provision that restricted transfers of funds and
assets between not-for-profit entitles.
The revised draft legislation addresses many of the problematic
issues with the previous draft. The principal features of the
revised draft are:
Definition of 'not-for-profit' will no longer
target commercial subsidiaries who generate a surplus for the
purpose of supporting charitable objectives
The 'In Australia' special condition for an income
tax exempt entity means that the entity operate principally in
Australia and pursue its purposes principally in Australia.
The 'In Australia' special condition for a DGR must
be established in Australia, operate solely in Australia and pursue
its purposes solely in Australia. Although activities outside
Australia that are incidental or minor will not cause a DGR to fail
the special condition
Organisations falling within the category of international
affairs, including international aid and development funds and
disaster relief funds satisfy the 'in Australia'
requirement if they are established in Australia.
The use of a donation made by an income tax exempt entity to a
non-income tax exempt entity will be taken into account when
determining whether the 'in Australia' requirement is
met in respect of the income tax exempt entity.
The use of a donation made by a DGR to a non-DGR will be taken
into account when determining whether the DGR meets the 'In
Exemption from the 'in Australia' special condition
for certain environmental organisations endorsed as DGRs operating
overseas, subject to certain requirements.
Entities that are currently prescribed in the regulations as
income tax exempt will be unaffected by the changes.
Gadens Lawyers is able to assist charities and
not-for-profit organisations to evaluate the impact of the proposed
changes set out in the exposure draft as well as participate in the
consultation to address the policy issues underlying the proposed
This report does not comprise legal advice and neither
Gadens Lawyers nor the authors accept any responsibility for
Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).