Summary - The Gillard Government has announced
that the 2011-12 budget measure "Better Targeting of NFP Tax
Concessions" will now commence from 1 July 2014.
On 31 January 2013 the Gillard Government
announced that the Better Targeting of Not-For-Profit tax
concessions legislation will now commence from 1 July 2014.
Assistant Treasurer, David Bradbury MP said "this extension
will enable further consultation and engagement with the NFP sector
on this measure and ensure there is an opportunity for detailed
stakeholder input to be provided."
The purpose of the legislation is to ensure that tax concessions
provided to NFP entities are targeted only at those activities that
directly further the NFP's altruistic purposes. Any activity
pursued by a NFP entity that is deemed to be "unrelated"
business will not be eligible for the tax concessions that the
entity is registered for (including FBT, GST and DGR).
Importantly, any surplus from "unrelated" business
activities that is not applied for the altruistic purposes of the
entity will be subject to income tax. This proposed tax has
commonly been referred to as "UBIT" (Unrelated Business
Initially, the new reforms, if passed into law, were due to
commence on 1 July 2011 and were due to apply only to
"new" unrelated commercial activities that commenced
after 7.30pm (AEST) on 10 May 2011. This commencement date was
deferred to 1 July 2012 and, with this latest announcement, the
Government has indicated that it will be deferred further to apply
from 1 July 2014.
From 1 July 2014 it is proposed that the UBIT will become
payable on "new" unrelated commercial activities. A
"new" unrelated commercial activity is one that commenced
after 7.30pm (AEST) on 10 May 2011. UBIT would be
payable only on any surplus that is not applied to the altruistic
purposes of the entity. If a NFP is liable to pay UBIT, the tax
will be calculated commencing on the revised commencement date of 1
It is also proposed that from 1 July 2015, UBIT will become
payable on any unrelated commercial activities which were commenced
prior to 7.30pm (AEST) on 10 May 2011. This will
not impact on tax concessions that were used for these activities
prior to 1 July 2015.
A further discussion paper and draft legislation will be
circulated by the Government for comment and we will advise when
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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