CHARITIES ALERT: Recent update on taxation exemptions/concessions relevant to charities

Dec 16 2015

Publications

Fringe Benefits Tax – salary packaged entertainment proposed amendments now law 

On 15 October 2015, the Government introduced the Tax and Superannuation Laws Amendment (2015 Measures No.5) Bill 2015 (TSLA Bill).  One of the topics covered in this Bill was to amend the Fringe Benefits Tax Assessment Act 1986 to limit the fringe benefits tax (FBT) concessional treatment of salary packaged entertainment benefits.  The amendments are the same as those in the previous exposure draft legislation released for public consultation on the announcement in the 2015-16 Federal Budget, which proposed to limit the FBT concessions on salary packaged entertainment benefits.  The TSLA Bill has been passed by both houses and received assent on 30 November 2015.  So it is now law. 

Below is a link to the TSLA Bill and the explanatory memorandum: 

http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;page=0;query=BillId%3Ar5536%20Recstruct%3Abillhome 

In summary, the law is now:

  • A separate single grossed-up cap of $5,000 applies for salary packaged meal entertainment and entertainment facility leasing expenses (entertainment benefits) for employees of public benevolent institutions, health promotion charities, public and not-for-profit hospitals, and public ambulance services. This is a change to the previous FBT law, as under the previous law, these employees could salary package entertainment benefits with no FBT payable by the employer, without the benefits being reported and being subject to any caps.
  • Salary packaged meal entertainment benefits are now reportable fringe benefits. That is, salary packaged meal entertainment benefits are taken into account in assessing an employee’s eligibility for certain tax concessions and an employee’s liability to certain levies and surcharges.
  • There is no access to elective valuation rules when valuing salary packaged entertainment benefits, which prevents unintended and excessively concessional values being applied to those benefits.

    The new law applies to assessments for the FBT year starting on 1 April 2016, and later FBT years.
    The new law means that certain charities’ FBT concessions on salary packaged entertainment benefits could be adversely affected.

    Revenue (Charitable Organisations) Legislation Amendment Act 2015
    (ACT) – tightening of ACT duty concessions and exemptions for charities

    The ACT Government amended the Duties Act 1999 (ACT) (Duties Act) and the Taxation Administration Act 1999 (ACT) to tighten the ACT duty concessions and exemptions for charities.

    These amendments were made by the Revenue (Charitable Organisations) Legislation Amendment Act 2015 (ACT) (ACT Amendment Act) and took effect on 25 November 2015.

    Click here to view the ACT Amendment Act and the explanatory statement on the Revenue (Charitable Organisations) Legislation Amendment Bill 2015.

    The new law potentially means that fewer organisations may obtain ACT duty concessions and exemptions.  Under the new definition, more organisations are expressly excluded.  These ‘excluded organisations’ are political parties, industrial organisations, professional organisations, organisations that promote trade, industry or commerce, and classes of organisations prescribed by regulation.

    Certain excluded organisations may apply to the Commissioner for a ‘beneficial organisation determination’.  If the Commissioner makes a ‘beneficial organisation determination’, the applicant would not be excluded from being a charitable organisation for the purpose of the Duties Act.

    Accordingly, charities with activities in the ACT should consider whether they satisfy the definition of ‘charitable organisation’, whether they are an ‘excluded organisation’, and if they are an ‘excluded organisation’, whether they can apply for a ‘beneficial organisation determination’.

    The ACT Amendment Act also amended the Payroll Tax Act 2011 (ACT) to amend the definition of ‘charitable organisation’ for payroll tax purposes to align it with the same definition used in the Duties Act.  The above issues regarding ACT duty similarly apply for payroll tax purposes.

    In addition, the ACT Amendment Act also amended the definition of ‘rateable land’ in the Rates Act 2004 (ACT) regarding exemptions for charities.  Charities should consider whether these amendments affect them. 

    Below are links to documents published in the ACT Revenue Office website:

    Statutes Amendment and Repeal (Budget 2015) Act 2015 (SA) – some amendments to the SA duty law and duty exemption for charities

    In the Statutes Amendment and Repeal (Budget 2015) Act 2015 (SA) (SA Amendment Act), the South Australian Government amended a number of provisions in the Stamp Duties Act 1923 (SA), including s71(5)(j), as part of the changes announced in the SA 2015-16 Budget Measures Statement.  Some of these changes are relevant to charities. The SA Amendment Act received assent on 26 November 2015 and is now law. 

    These amendments (including amendment to s71(5)(j)) were introduced by the Statutes Amendment and Repeal (Budget 2015) Bill 2015 (SA Bill). 

    The amendment to s71(5)(j) took effect on assent.  If it is satisfied, the transfer will be exempt from duty.  Below is the new s71(5)(j): 

    a transfer of property to a body established wholly for charitable or religious purposes where the Commissioner is satisfied that the property will not be used (wholly or predominantly) for commercial or business purposes (including on the basis that this paragraph will not apply even if any revenue, income or other benefit arising from the use of the property for commercial or business purposes will be applied towards the charitable or religious purposes of the body); 

    The above text of the new s71(5)(j) is the same as contained in the SA Bill. 

    The amendment to s71(5)(j) means that transfers of property in SA to bodies that are established wholly for charitable or religious purposes may be exempt.  It assists charities obtaining exemptions as the transfer need not be a gift without consideration (as was previously required for the transfer to be exempt from duty).

    However, there are restrictions on the use of the property, ie the transferee cannot use the property for commercial or business purposes.  Whether the use of the property is for commercial or business purposes needs to be considered.  This was not previously a requirement for a transfer to be exempt from duty. 

    Some other important amendments to the Stamp Duties Act 1923 (SA) which could be relevant to charities include: 

    • SA stamp duty on the transfer of non-residential, non-primary production real property is to be abolished from 1 July 2018 (stamp duty is to be phased out progressively – one third reduction of the duty from 1 July 2016 (though this is proposed to be changed to 7 December 2015, see further comments below), with a further one third reduction of the duty from 1 July 2017). 
    • The SA Amendment Act also inserted an anti-avoidance provision in the Stamp Duties Act 1923 (SA) aimed, very broadly, at transactions/strategies put in place prior to the reduction/abolition intended to take effect after the reduction/abolition. 

    Below is a link to Revenue SA’s Information Circular No. 84 – Statutes Amendment and Repeal (Budget 2015) Act 2015 State Budget 2015-16 issued on 26 November 2015, which provides some general information on the SA Amendment Act:

    http://www.revenuesa.sa.gov.au/info_circulars/IC_084.pdf 

    The start date for the one third reduction of the duty on the transfer of non-residential, non-primary production real property is proposed to be brought forward from 1 July 2016 to 7 December 2015.  This was announced by the SA Treasurer Tom Koutsantonis in a News Release on 7 December 2015 and was referred to in Revenue SA Information Circular No. 86 – “Stamp Duties Act 1923 2015-16 Mid-Year Budget Review Stamp Duty on Transfers of Non-residential, Non-primary Production Real Property”, issued on 7 December 2015.  The Stamp Duties Act is proposed to be amended to make the change of the date. 

    Click below to view the News Release and Revenue SA’s Information Circular No.86: 

    http://www.premier.sa.gov.au/images/news_releases/2015/15_12Dec/taxreformsbroughtforwardmybr.pdf 

    http://www.revenuesa.sa.gov.au/info_circulars/IC_086.pdf 

    Ancillary funds reporting deadline extension 

    For ancillary funds which are required to lodge Annual Information Statements with the Australian Charities and Not-for-profits Commission (ACNC), if their reporting period is the standard financial year (ie 1 July to 30 June), their Annual Information Statement for the year ended 30 June 2015 will be due on 28 February 2016

    This is an extension of the due date that the Commissioner has granted to these ancillary funds, so that the due date for lodgement of their Annual Information Statements with the ACNC will align with the due date for the lodgement of their returns with the Australian Taxation Office (ATO). 

    Below are links to relevant publications in the ACNC’s website regarding the above: 

    http://www.acnc.gov.au/ACNC/FTS/Fact_Type_PAF.aspx?TemplateType=P 

    http://www.acnc.gov.au/ACNC/Comms/Com_Col/CC_20151029.aspx 

    Recent developments with the ACNC 

    We are aware of the following recent initiatives and action in relation to the ACNC: 

    • The ACNC has recently issued an exposure draft Commissioner Information Statement on the position of government entities and charities (Exposure Draft CIS 2016/01 – Commissioner’s Interpretation Statement: Meaning of ‘Government Entity’).  The public is invited to provide written comments by 29 January 2016.
    • New guidelines on public benevolent institution status will be dealt with in an ACNC Commissioner Interpretation Statement.  There is a delay on the issue of this Commissioner Information Statement until next year.
    • The ACNC is in the process of finalising the Commissioner Information Statement on commercial sensitivity (previously issued as Exposure Draft CIS 2015/02 – Commissioner’s Interpretation Statement: withholding or removing commercially sensitive information from the ACNC Register).

    Written by:

    Philip de Haan | Partner | +61 2 9020 5703 | pdehaan@tglaw.com.au

    Yat To Lee | Senior Associate | +61 2 9020 5742 | ylee@tglaw.com.au